Issue in Focus
Sep 27 2019
Construction is one of the most important industries in our economy. It provides much of the infrastructure needed in our daily lives, and it’s a huge source of jobs in our country for both high and low-skilled workers.
Unfortunately, there’s an 80-year old wage subsidy law on the books that is artificially inflating costs of federally funded construction projects on our nation’s infrastructure – costing taxpayers billions of dollars and unfairly discriminating against low-skilled workers.
The Davis-Bacon Act, (DBA) passed by Congress in 1931, requires that federally-funded construction projects worth more than $2,000 pay workers at least the “prevailing wage” rate on non-federal projects in the same locality. In the midst of the Great Depression, the act was intended to prevent the purchasing power of the federal government from driving down construction wages.
However, the “prevailing wage” is determined not by market forces operating in reality, but by federal bureaucrats operating in Washington, D.C. An agency called the Wage and Hour Division (WHD) surveys construction wages and publishes prevailing wage determinations for each county in the United States, which federal contractors are then obliged to pay each class of worker.
But the WHD is an enforcement agency that has no expertise in accurately calculating wage rates, and which uses faulty and unscientific methods for its surveys. In fact, the WHD prevailing wage rates are usually inflated union wages based on self-selected survey samples that reflect only a small number of worker responses.
The result? In most cities, DBA wages are wildly out of touch with the prevailing market rates. In some cities, DBA rates are more than double market wages. In others, DBA rates are the minimum wage. On average, federal contractors are charged a 22 percent premium on their labor costs above what private companies pay for the same project.
This has wasted far too many taxpayer dollars.
One study found that Davis-Bacon requirements cost U.S. taxpayers an additional $8.6 billion annually and increase the costs of federally funded construction projects by 9.9 percent. It’s estimated that in just 2010, repealing Davis-Bacon would have saved taxpayers $10.9 billion and could have employed another 155,000 more construction workers.
And since DBA requires that they be paid at the same rate as skilled workers, it has also disincentivized federal contractors from hiring and training low-skilled and non-unionized workers. It prevents them from getting a fair shot a job, and instead funnels money to prop up big labor unions that can keep up with DBA wage rates.
It’s about time that we lift these outdated, unfair, and costly requirements off the books, which is why I will soon be introducing a bill to repeal the Davis-Bacon Act.
By doing so, we will save taxpayer money, allow construction money to go farther for our infrastructure projects, and create more jobs that will be open to workers of all skill levels.