Bringing Home the Davis-Bacon

“Bringing home the bacon” describes earning money for a job performed (i.e., providing the means to purchase basic sustenance).  Therefore, it seems fitting that a lingering example of federally-mandated wage supports is named, in part, for Rep. Robert L. Bacon (R-N.Y.):  The Davis-Bacon Act of 1931 was also co-sponsored by Sen. James J. Davis (R-Pa.), a former Secretary of Labor.

According to the Congressional Research Service (CRS), the Davis-Bacon Act of 1931 “as amended, requires that contractors engaging in certain federal contract construction pay workers on such projects not less than the locally prevailing wage for comparable work. In addition, such contractors are required to file payroll reports and to meet other administrative and labor standards requirements.”

The law was touted as an effort to prevent the purchasing power of the federal government from otherwise driving down wages in the construction trades during the Great Depression.  The threshold for triggering Davis-Bacon requirements was dropped from contracts costing $5,000 to those costing only $2,000 in 1935, thus spreading its application more broadly.  Therefore, legislators could take credit for a “one-two punch” to goose their districts’ economies:  first, by establishing a wage floor for any federal projects constructed at home, and second, by making sure that more projects qualified for the higher wages.

By the same token, some experts suggest that there were more invidious reasons for the passage of the legislation.  During the Great Depression, jobs were scarce, and competition for those that could be had was intense.  The Institute for Justice, among others, maintains that the Davis-Bacon Act “has racist origins and continues today to have a devastating impact on economic outsiders.” 

Indeed, in 1927, a contract had been awarded to an Alabama firm (comprised of a predominantly black, non-union workforce) to build a federal hospital in Rep. Bacon’s own Long Island district, undercutting local union laborers.  Although he argued that the workers were housed in shacks and paid very low wages, Bacon ignored the reality that the southerners were there voluntarily and providing the service at a savings to taxpayers.  His efforts to remedy the situation legislatively that year proved unsuccessful.   He tried again in 1928, having won the support of then-Labor Secretary James Davis, but Congress adjourned without passing the bill.

Only after the onset of the Great Depression and Davis’ 1930 election to the Senate did the combined efforts of Bacon and Davis prevail, on a voice vote, in early 1931.  President Herbert Hoover quickly signed the bill into law.

The legislation has metastasized over time.  CRS noted that the law “has also been the subject of technical amendments through the years, and Davis-Bacon provisions have been added to more than 50 federal program statutes.”  By 1964, the prevailing wage concept had expanded to encompass fringe benefits.

During its history, the requirements have only been suspended four times, as allowed in cases of “national emergency.”  Its first suspension, for three weeks in 1934 under President Franklin D. Roosevelt, seemed more about administrative convenience (during the enactment of higher priority New Deal initiatives) than for any real emergency.  In 1971, President Richard M. Nixon suspended the law, in the context of controlling inflation.  In 1992, President George H.W. Bush suspended the law in Florida, Louisiana, and Hawaii, arguing that honoring the prevailing wage in areas damaged by Hurricanes Andrew and Iniki would increase the costs of rebuilding.  The suspension was eventually lifted by President Bill Clinton in early 1993.

Between September and November 2005, President George W. Bush suspended the Davis-Bacon requirements in Florida, Alabama, Mississippi, and Louisiana, in the wake of Hurricane Katrina.  CRS reported that several members of Congress made the case that suspending Davis-Bacon “will avoid costly delays that [will] impede clean-up and reconstruction efforts…  [Davis-Bacon] regulations effectively discriminate against… non-union and lower-skilled workers… [and] can even raise total construction costs by up to 38%.”

Davis-Bacon (with its inherent bias toward unionized labor) relies on the Department of Labor’s (DOL) Wage and Hour Division (WHD) to ascertain prevailing wage rates.  The WHD conducts a survey of construction wages, then publishes a prevailing wage for each of the nation’s three thousand-plus counties.  However, according to studies by the Heritage Foundation, these surveys are deeply flawed, and when compared to the Bureau of Labor Statistics’ (BLS) more reliable Occupational Employment Statistics, Davis-Bacon rates are an average of 22 percent higher than market wages.

A June 2012 white paper from Columbia University, “The Complex Worlds of New York Prevailing Wage,” affirms this thesis.  According to the authors:

·       The duplication of effort between different divisions of governmental departments is confusing as well as wasteful.  Labor departments should use one reliable set of data to set prevailing wage rates.

·       Mean and median wage data collected by state labor departments track closely to the data published by BLS.  Either BLS should collect and publish the data, or the states should, following BLS standards and methodologies.  The duplication of effort between authorized research groups at different governmental levels is bewildering and inefficient.

·       Full national reform of prevailing wage should require use of BLS data to set hourly wages.  A conventional fringe-benefit rate in the range of 25-40 percent—following standard practices for health insurance, retirement allowance, vacation, holiday pay, etc.—needs to be developed and implemented.  Transition from WHD to BLS would yield significant savings in federal and state agency resources, simplify administration and reporting for agencies and contractors, lower contracting costs for public construction, and vastly improve transparency of prevailing wage policy, rate-setting, and implementation.

In its indictment, “The Case against the Davis-Bacon Act: 54 Reasons for Repeal,” the Cato Institute lambastes the law:  “The Davis-Bacon Act… has afflicted the construction industry for eight full decades…  It has been actively sustained through biased participation by the [DOL] for the exclusive benefit of organized labor.  If not repealed, Davis-Bacon will add billions of dollars of unnecessary costs to public works built over the next decade.”

The current debate about the Highway Trust Fund (HTF) is the latest battleground over Davis-Bacon.  Sen. Mike Lee (R-Utah) proposed an amendment to H.R. 5021, the bill extending the HTF beyond its current expiration date of September 30, 2014, to repeal the requirements of the Davis-Bacon Act as they apply to federally funded highway construction.  Otherwise, based on analysis by the Heritage Foundation, the act would increase the cost of the projects by 9.9 percent.  Sen. Lee’s amendment was not allowed for consideration.

Short of suspending or repealing Davis-Bacon, there other ways to mitigate the law’s negative impact.  Many have forgotten, are ignoring, or never realized that the HTF was originally established in 1956 to finance the construction of President Eisenhower’s Interstate Highway System, a goal that was largely accomplished in the late twentieth century.

With that national network virtually complete, fiscal conservatives and Tenth Amendment scholars have argued that the development and maintenance of roads (the vast majority of them non-federal) should fall to the states and localities.  Sen. Lee, along with Rep. Tom Graves (R-Ga.), has introduced the Transportation Empowerment Act, incrementally lowering the federal gas tax from 18.4 cents per gallon to 3.7 cents over five years, narrowing the scope of the federal highway program over the same period, and gradually returning most responsibilities to the states.

If that legislation was enacted, the federal highway program would all but go away; only those activities narrowly associated with the interstate system would be financed by the HTF.  In that case, the Davis-Bacon mandates would apply only to a tiny minority of highway projects, and its stranglehold on national infrastructure would be significantly weakened.  In turn, states and localities could much more feasibly (and efficiently) maintain those critical infrastructure projects vital to their economic development, without the undue burden of arbitrarily high labor costs mandated by the federal government.

With less costly transportation and construction costs, more communities around the country could really begin to “bring home the bacon.”