The Department of Labor on Aug. 8 finalized an 812-page rule that contains more than 50 significant changes to the 1931 Davis-Bacon Act. Instead of modernizing and improving this deeply flawed law, those changes double down on its shortcomings.
Such massive changes make a bill introduced earlier this year by Rep. Bob Good, R-Va.—the Repeal Davis-Bacon Act—all the more important to protect taxpayers, small construction companies, and the 83% of construction workers who are not unionized.
The Davis-Bacon Act is a 1931 law that requires contractors on federally funded construction projects pay at least the local “prevailing” wage and benefits, so that federal projects don’t drag down local compensation.
While the Davis-Bacon Act no longer aims to discriminate against black workers, it blatantly discriminates against nonunionized construction workers, and it fails to achieve its goal of providing market-based compensation. That’s because the Department of Labor substitutes its own contrived, non-scientific calculations of “prevailing wages” for actual market wages. Consequently, the act drives up the costs of federal construction projects by 9.9%.
The Government Accountability Office and the Labor Department’s Office of Inspector General have repeatedly criticized the department’s Wage and Hour Division for its survey methodology, including using non-scientific, self-selected, and small samples to estimate wages and allowing 100% error rates in surveys. The result of these shortcomings—which the Labor Department has failed to address—is to set inflated union wages as the “prevailing” wages, even when they are nowhere near the true market wage. And in places with little or no unionized construction labor, wages are often set below the true market.
For example, comprehensive wage surveys from the Bureau of Labor Statistics show that market wages for cement masons are $19.51 in Spartanburg, South Carolina, yet, the Davis Bacon Act sets prevailing wages at $14.10 per hour in Spartanburg (38% below market wages) and sets prevailing benefits at $0.00.
Meanwhile, in the heavily unionized Nassau-Suffolk, New York, area, market wages for cement masons are $36.95 per hour, and Davis-Bacon wages are set at $51.97 per hour (29% above market wages) with Davis-Bacon benefits adding $33.56 per hour, amounting to more than $171,000 in annual compensation for cement masons.
Instead of correcting the act’s flaws, the Department of Labor’s new rule adds insult to injury with more than 50 significant changes, including using new and less accurate wage-determination criteria, expanding the number of jobs and workers covered by the Davis-Bacon Ac and increasing the frequency of Davis-Bacon Act wage-level adjustments.
As just one example, the rule proposes to reduce the minimum data standards required to set wages from at least six workers across at least three companies (already a non-credible sample size) to as few as three workers across two companies.
The consequence of the Davis-Bacon Act is primarily to inflate taxpayer costs on federal construction projects and to preclude the overwhelming majority of construction companies and construction workers from participating in federal construction projects.
That’s particularly relevant now as the federal government embarks on unprecedented federal construction spending. As noted in the Department’s 812-page final rule:
The Davis-Bacon Act and now 71 active Related Acts collectively apply to an estimated $217 billion in Federal and federally assisted construction spending per year and provide minimum-wage rates for an estimated 1.2 million U.S. construction workers.The Department expects these numbers to continue to grow as Federal and State governments seek to address the significant infrastructure needs of the country, including, in particular, the energy and transportation infrastructure necessary to mitigate climate change.
Considering that the Davis-Bacon Act is estimated to drive up federal construction costs by 9.9%, taxpayers can expect to pay a $21.5 billion annual surcharge for federal construction. Combined with all the added regulations that will drive up administrative costs and limit competition, taxpayers can expect to pay more and get less.
Ironically, the Repeal Davis-Bacon Act would better accomplish the Davis-Bacon Act’s stated goal of ensuring market wages on federal construction project than would allowing the existing act to stand.
While outright repeal is the best solution, if that’s not achievable, the Department of Labor should at least apply more accurate wage and benefit determinations using the Bureau of Labor Statistics’ vastly superior surveys and methodologies.
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