Sen. Lamar Alexander (R-TN) is making the case for repealing the Depression-era Davis-Bacon Act. The law, passed in 1931, bars contractors and subcontractors from paying their workers anything under the “local prevailing wage” when working on federally funded or assisted construction contracts of over $2,000.
The law was passed in response to companies using lower cost migrant labor to win construction bids during the Great Depression. In several cities, the migrant laborers were beating out local construction workers because they were willing to work for lower wages. The Davis-Bacon Act sought to protect those local workers by establishing a wage floor.
The Davis-Bacon Act is highly controversial because of the hopelessly broad mandates. To start with, it’s not exactly easy to determine what local prevailing wages are, as evidenced by the fact that the Department of Labor has never conceived of a program to issue accurate wage determinations. In 1979, the Government Accountability Office (then the Government Accounting Office) even produced a report titled, “The Davis-Bacon Act Should Be Repealed,” calling the law “unnecessary.”
In addition to being unnecessary and confusing, the Davis-Bacon Act has had many unintended negative consequences. It effectively prices less skilled, non-union construction workers out of jobs, since companies raise their standards for the quality of labor when the price of that labor is raised. That might not seem that bad because employers naturally want the most skilled workers. And if unionized construction workers are the most skilled, what’s the problem?
The problem is that 86.8 percent of private construction workers aren’t affiliated with a union. That means that the Davis-Bacon Act effectively discriminates against the vast majority of private construction workers by forcing the cost of labor above the market price. As a result, less construction projects are initiated and fewer workers are hired.
This expensive requirement costs taxpayers $10.9 billion in additional construction costs. The Congressional Budget Office has estimated that repealing the law would save $12.7 billion over 10 years. The CBO also reminds us that the Davis Bacon Act is arguably useless since minimum wage requirements have been encoded in federal law for quite some time now.
Davis-Bacon imposes unnecessary costs for zero net gain. It should be repealed.