Thoughts on the Davis Bacon Act

CNN Money is reporting President Bush used Katrina to suspend the Davis Bacon Act.

President signs executive order allowing contractors to pay below prevailing wage in affected areas.

President Bush issued an executive order Thursday allowing federal contractors rebuilding in the aftermath of Hurricane Katrina to pay below the prevailing wage.
In a notice to Congress, Bush said the hurricane had caused "a national emergency" that permits him to take such action under the 1931 Davis-Bacon Act in ravaged areas of Alabama, Florida, Louisiana and Mississippi.

The Davis-Bacon law requires federal contractors to pay workers at least the prevailing wages in the area where the work is conducted. It applies to federally funded construction projects such as highways and bridges. Bush's executive order suspends the requirements of the Davis-Bacon law for designated areas hit by the storm.

Bush's action came as the federal government moved to provide billions of dollars in aid, and drew rebukes from two of organized labor's biggest friends in Congress, Rep. George Miller of California and Sen. Edward Kennedy of Massachusetts, both Democrats.

"The administration is using the devastation of Hurricane Katrina to cut the wages of people desperately trying to rebuild their lives and their communities," Miller said.

"President Bush should immediately realize the colossal mistake he has made in signing this order and rescind it and ensure that America puts its people back to work in the wake of Katrina at wages that will get them and their families back on their feet," Miller said.

"I regret the president's decision," said Kennedy.

"One of the things the American people are very concerned about is shabby work and that certainly is true about the families whose houses are going to be rebuilt and buildings that are going to be restored," Kennedy said.

The International Brotherhood of Electrical Workers AFL-CIO also blasted Bush in this article. Following is a small snip:

"The IBEW will join with our friends, far and wide, to prevent President Bush from reversing this mission in the midst of Katerina's unimaginable human suffering," he added.

The DailyKos Writes

"Bush continues to act outrageously and opportunistically to advance his ideological and political agenda and enrich his political allies in this time of national crisis. He has suspended rules for pollution control, tried to use the crisis to enhance fears about social security, hire Halliburton, etc...now he suspends the prevailing wage rule in the areas that need decent jobs."

That sounds pretty mean doesn't it. But is it? Enquiring minds might want to know if there is another side to this story. Indeed there is.

Let's start with a brief review of the Davis-Bacon Act which was passed in 1931 and amended a couple of times.

The Davis-Bacon Act as amended, requires that each contract over $2,000 to which the United States or the District of Columbia is a party for the construction, alteration, or repair of public buildings or public works shall contain a clause setting forth the minimum wages to be paid to various classes of laborers and mechanics employed under the contract. Under the provisions of the Act, contractors or their subcontractors are to pay workers employed directly upon the site of the work no less than the locally prevailing wages and fringe benefits paid on projects of a similar character. The Davis-Bacon Act directs the Secretary of Labor to determine such local prevailing wage rates.

According to the Institute for Justice here is The History of the Davis-Bacon Act.

The co-author of the Davis-Bacon Act, Rep. Robert Bacon, represented a congressional district in Long Island. Bacon's opinions on issues like immigration demonstrate the extent to which his views were patently racist. For example, in 1927, the same year he introduced the Davis-Bacon Act, he submitted the following statement from 34 university professors concerning a new immigration law into the Congressional Record:

We urge the extension of the quota system to all countries of North and South America from which we have substantial immigration and in which the population is not predominantly of the white race. . . . Only by this method can that large proportion of our population which is descended from the colonists . . . have their proper racial representation. . . . Congress wisely concluded that only by such a system of proportional representa-tion . . . could the racial status quo be maintained.

In 1927, Bacon submitted H.R. 17069, "A Bill to Require Contractors and Subcontractors Engaged on Public Works of the United States to Comply With State Laws Relating to Hours of Labor and Wages of Employees on State Public Works." This action was a response to the building of a Veterans' Bureau Hospital in Bacon's district by a contractor from Alabama, who employed only black laborers.

Over the next four years, Bacon submitted 13 more bills to regulate labor on federal public works contracts. Finally, the bill submitted by Bacon and Senator James Davis was passed in 1931, at the height of the depression, with the support of the American Federation of Labor.

The comments made by various congressmen during the debate over the different bills submitted by Bacon betrayed the racial animus that motivated the passage of the law. Representative John Cochran stated, "I have received numerous complaints in recent months about southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South." Representative Clayton Allgood similarly complained, "That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country."

Other derogatory comments were made about the use of "cheap labor," "cheap, imported labor," "transient labor," and "unattached migratory workmen." Thus, while the sponsors and supporters of the Act also intended it to disadvantage immigrant workers of other races, these thinly veiled references make it clear that the Act was primarily intended to discriminate against blacks.

Effects of the Davis-Bacon Act

The Davis-Bacon Act imposes tremendous economic and social costs-at least $1 billion in extra federal construction costs and $100 million in administrative expenses each year. Industry compliance costs total nearly $190 million per year. Repeal of the Act would also create an estimated 31,000 new construction jobs, most of which would go to members of minority groups.

Davis-Bacon's impact on the ability of minorities to find work in the construction industry has been particularly devastating. The Department of Labor's initial set of regulations did not recognize categories of unskilled workers except for union apprentices. As a result, contractors had to pay an unskilled worker who was not part of a union apprenticeship program as much as a skilled laborer, which almost completely excluded blacks from working on Davis-Bacon projects. This effectively foreclosed the only means by which unskilled blacks could learn the necessary skills to become skilled workers.

Ralph C. Thomas, former executive director of the National Association of Minority Contractors, stated that a minority contractor who acquires a Davis-Bacon contract has "no choice but to hire skilled tradesmen, the majority of which are of the majority. " As a result, Thomas said, "Davis-Bacon closes the door in such activity in an industry most capable of employing the largest numbers of minorities."

The paperwork a contractor must fill out pursuant to Davis-Bacon contracts also discriminates against small, minority-owned firms. Many do not have personnel with the necessary expertise to complete the myriad forms and reports required.

As a result of all these factors, the Davis-Bacon Act prevents rural and inner-city laborers and contractors from working on projects in their own communities. Ironically this is one problem Davis-Bacon was intended to prevent.

Unfortunately Mish does not have a time machine to go back and verify some of those racial claims but logic alone would dictate that forcing local contractors to pay some government mandated "prevailing wage" is bound to drive up costs and lower employment if for no other reason than nonsensical bureaucratic compliance.

Here is the official U.S. Department of Labor DAVIS-BACON WAGE DETERMINATION REFERENCE MATERIAL.

Here is a description of the obviously wasteful wage determination practice:

The Davis-Bacon Wage Determinations contained on this web site are wage determinations issued by the U.S. Department of Labor under the Davis-Bacon and related Acts. The Wage and Hour Division of the U.S. Department of Labor determines prevailing wage rates to be paid on federally funded or assisted construction projects. It is the responsibility of the federal agency that funds or financially assists Davis-Bacon covered construction projects to ensure that the proper Davis-Bacon wage determination(s) is/are applied to such construction contracts(s).

Here is a list of 117 determinations that will be modified for the week of 09/16/2005.
Note: That list was at the time of this writing it is subject to change. Some of the items on that list have already been modified as many as 36 times previously.

I am not going to bother to count this next list but there are another 100 or so determinations for the week of 09/09/2005.

Gee I wonder how many bureaucrats it takes to make all those weekly adjustments, just so the government can overpay some sort of nonsensical prevailing wage at taxpayer expense for the benefit of practically no one.

Questions regarding Davis-Bacon Wage Determinations?
Contact Wage and Hour at dbra-faqs@fenix2.dol-esa.gov
How many people does that take?

Look at all the classifications that must be supported:

ASBE = International Association of Heat and Frost Insulators and Asbestos Workers
BOIL = International Brotherhood of Boiler Makers, Iron Shipbuilders, Blacksmiths, Forgers and Helpers
BRXX = International Union of Bricklayers, and Allied Craftsmen
(bricklayers, cement masons, stone masons, tile, marble and terrazzo workers)
CARP = United Brotherhood of Carpenters and Joiners of America
ELEC = International Brotherhood of Electrical Workers
(electricians, communication systems installers, and other low voltage specialty workers)
ELEV = International Union of Elevator Constructors
ENGI = International Union of Operating Engineers
(operators of various types of power equipment)
IRON = International Association of Bridge, Structural and Ornamental Iron Workers
LABO = Laborers' International Union of North America
PAIN = International Brotherhood of Painters and Allied Trades
(painters, drywall finishers, glaziers, soft floor layers)
PLUM = Operative Plasterers' and Cement Masons' International Association of the United States and Canada
PLAS = United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada
ROOF = United Union of Roofers, Waterproofers and Allied Workers
SHEE = Sheet Metal Workers International Association
TEAM = International Brotherhood of Teamsters

Here is the survey program to help make determinations.

Is it easy to prove compliance?
Who knows but perhaps The Boon Group can help.

In 1999 Ron Paul introduced THE DAVIS-BACON REPEAL ACT.

Mr. Speaker, I rise today to introduce the Davis-Bacon Repeal Act of 1999. The Davis-Bacon Act of 1931 forces contractors on all federally-funded contraction projects to pay the `local prevailing wage,' defined as `the wage paid to the majority of the laborers or mechanics in the classification on similar projects in the area.' In practice, this usually means the wages paid by unionized contractors. For more than sixty years, this congressionally-created monstrosity has penalized taxpayers and the most efficient companies while crushing the dreams of the most willing workers. Mr. Speaker, Congress must act now to repeal this 61-year-old relic of an era during which people actually believed Congress could legislate prosperity. Americans pay a huge price in lost jobs, lost opportunities and tax-boosting cost overruns on federal construction projects every day Congress allows Davis-Bacon to remain on the books.

Davis-Bacon artificially inflates construction costs through a series of costly work rules and requirements. For instance, under Davis-Bacon, workers who perform a variety of tasks must be paid at the highest applicable skilled journeyman rate. Thus, a general laborer who hammers a nail must now be classified as a `carpenter,' and paid as much as three times the company's regular rate. As a result of this, unskilled workers can be employed only if the company can afford to pay the government-determined `prevailing wages' and training can be provided only through a highly regulated apprenticeship program. Some experts have estimated the costs of complying with the paperwork imposed on contractors by Davis-Bacon regulations at nearly $200 million a year. Of course, this doesn't measure the costs in lost job opportunities because firms could not afford to hire an inexperienced worker.

Most small construction firms cannot afford to operate under Davis-Bacon's rigid job classifications or hire the staff of lawyers and accountants needed to fill out the extensive paperwork required to bid on a federal contract. Therefore, Davis-Bacon prevents small firms from bidding on federal construction projects, which, unfortunately, constitute 20 percent of all construction projects in the United States.

Because most minority-owned construction firms are small companies, Davis-Bacon keeps minority-owned firms from competing for federal construction contracts. The resulting disparities in employment create a demand for affirmative action, another ill-suited and ill-advised big government program.

The racist effects of Davis-Bacon are no mere coincidence. In fact, many original supporters of Davis-Bacon, such as Representative Clayton Allgood, bragged about supporting Davis-Bacon as a means of keeping `cheap colored labor' out of the construction industry.

In addition to opening up new opportunities in the construction industry for smaller construction firms and their employees, repeal of Davis-Bacon would also return common sense and sound budgeting to federal contracting which is now rife with political favoritism and cronyism. An audit conducted earlier this year by the Labor Department's Office of the Inspector General found that inaccurate data were frequently used in Davis-Bacon wage determination. Although the Inspector General's report found no evidence of deliberate fraud, it did uncover material errors in five states' wage determinations, causing wages or fringe benefits for certain crafts to be overstated by as much as $1.08 per hour!

The most compelling reason to repeal Davis-Bacon is to benefit to the American taxpayer. The Davis-Bacon Act drives up the cost of federal construction costs by as much as 50 percent. In fact, the Congressional Budget Office has reported that repealing Davis-Bacon would save the American taxpayer almost three billion dollars in four years!

Mr. Speaker, it is time to finally end this patently unfair, wildly inefficient and grossly discriminatory system of bidding on federal construction contracts. Repealing the Davis-Bacon Act will save taxpayers billions of dollars on federal construction costs, return common sense and sound budgeting to federal contracting, and open up opportunities in the construction industry to those independent contractors, and their employees, who currently cannot bid on federal projects because they cannot afford the paperwork requirements imposed by this act. I, therefore, urge all my colleagues to join me in supporting the Davis-Bacon Repeal Act of 1999.

Bush should not be criticized for suspending Davis-Bacon, rather he should be criticized for not doing enough in working with Congress to repeal it. Davis-Bacon is a real piece of pork and it's high time this legislation is thrown on the scrap heap of history.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/