Goldwater Stands Up to Illegal ‘Prevailing Wage’ Mandate in Tempe

The Tempe City Council is considering a burdensome, illegal “prevailing wage” ordinance that would restrict qualified businesses from competing for taxpayer-funded public-works projects while hurting small businesses, minorities, younger workers, and all Tempe taxpayers. Today, on behalf of dozens of Arizona businesses, the Goldwater Institute sent the city council a letter urging it not to adopt the ordinance.

The draft ordinance would require businesses that contract with the city for construction projects costing more than $250,000 to follow a slew of new requirements: they must provide their employees with wages and benefits based on complicated formulas produced by the federal government, they must keep painstaking records, and they must comply with a host of other rules and regulations. The mandate, which was introduced Friday with less than a week’s notice for the many stakeholders it would affect, also puts pressure on contractors to provide financial support to union-sponsored apprenticeship programs or trade schools.

By imposing new burdens on companies that do work for the city, the ordinance would cause businesses and their employees to miss out on opportunities, forcing many smaller businesses out of the market. It would also force Tempe taxpayers to foot the bill for higher project costs, and to wait longer for public projects to get done.

But Goldwater is standing up for hardworking Arizonans. Writing to the city council on behalf of the Associated Minority Contractors of Arizona and Arizona Builders Alliance—which together represent dozens of businesses—Goldwater points out that the ordinance violates a voter-approved state statute, A.R.S. § 34-321, that prohibits cities from imposing “prevailing wage” requirements on public works contractors.

Research shows that “prevailing wage” laws like this ordinance disproportionately hurt small businesses, minorities, and younger workers by cutting into these businesses’ already-thin margins and making it cost-prohibitive for them to hire entry-level employees. In fact, as far back as the 1930s, governments have enacted these types of mandates to keep non-unionized black and immigrant workers from working on government-funded construction projects.

The city of Phoenix recently passed its own “prevailing wage” law—a mandate similar to Tempe’s. But the city repealed the law less than a week after Goldwater pointed out that it was illegal and burdensome, and demanded the city council ditch it.

When private businesses compete to provide the best services at the best price, everybody wins. But when the government saddles those businesses with burdensome regulations, it hurts entrepreneurs, employees, residents, and taxpayers alike. In Tempe, Phoenix, and throughout the country, Goldwater will always fight to defend the rule of law, hold government accountable, and protect Americans’ ability to live their lives free from burdensome, counterproductive government regulations.

You can read our letter to the Tempe City Council here.

John Thorpe is a Staff Attorney at the Goldwater Institute.