President Donald Trump has grandiose plans for $1 trillion in infrastructure spending as part of his administration’s plan to create jobs and spur economic growth. Whether or not this is a proper use of taxpayer dollars is another question, but any public funds that support construction should at least be spent wisely and economically.
For far too long, the federal government has squandered countless tax dollars by inflating the cost of public works projects. This is because of the Depression-era law known as the Davis-Bacon Act. The legislation bars federal contractors from paying their workers anything under the local prevailing wage, which is normally equal to the union rate in the area, when working on federally funded or assisted construction contracts of over $2,000. The law also requires the Department of Labor (DOL) to conduct regional wage determination surveys in order to set wage rates for over 100 job classifications.
Needless to say, the union rate is above the market rate, so taxpayers are paying more to build infrastructure than necessary. Without Davis-Bacon requirements, the federal government could undertake more construction projects, employ more workers, or simply save taxpayer money. And it is not a petty amount of tax dollars that could be saved. As I've previously noted:
In December 2016, the Congressional Budget Office (CBO) estimated that repealing Davis-Bacon prevailing wage requirements could save taxpayers $13 billion on federal construction projects between 2018 and 2026.
Thankfully, there is at least one member of Congress who cares whether or not the public’s money is spent efficiently. Representative Paul Gosar (R-AZ) has introduced an amendment to the FY 18 National Defense Authorization Act, which would reform how Davis-Bacon wage determinations would be made. Specifically, “any determination of the prevailing wage…shall be conducted by the Secretary of Labor acting through the Bureau of Labor Statistics using surveys carried out by the Bureau that use proper random statistical sampling techniques.”
Though technical, this is a much needed reform. A prominent reason why construction costs under Davis-Bacon projects rise so far above the market rate is because the Wage and Hour Division at the DOL, which conducts the wage determination surveys, inflates how much wages are in various areas of the country.
Research from the Beacon Hill Institute compared the Wage and Hour Division wage determinations with wage estimates from the Bureau of Labor Statistics. They took a “sample of nine occupational categories accounting for 59% of all construction workers across 80 metropolitan areas.”
And what they found is that the Wage and Hour Division determinations compared to the Bureau of Labor Statistics could raise the cost by as much as 22 percent, on average.
Rep. Gosar’s amendment is expected to receive a vote today. Though Republicans tout themselves as the fiscally conservative party, and hold a solid majority in the House, this vote will not be a cakewalk. Representative Steve King (R-IA) has submitted several amendments to reform Davis-Bacon in the past, and the results have been less than promising. In one instance, 54 Republicans voted against Rep. King’s amendment to bring down the cost of federal construction projects.
Hopefully, Republicans will change their tune and vote in favor of the American taxpayer, but, if not, they should be aware that conservative groups like Heritage Action and FreedomWorks are key-voting this amendment.