The word “prevailing” appears 27 times in the text of the misleadingly named Inflation Reduction Act, which was passed by Congress Sunday and will spend an estimated $370 billion on federal energy and environmental projects. The seemingly harmless word ensures that not only will taxpayers have to foot the bill for all of that spending, but they won’t get good value for the money. The bill’s authors likely did this to curry favor with unions.
Prevailing in this context refers to “prevailing wages.” Every section of the Act that authorizes the government to dole out money—11 in total—states that any workers employed “by the taxpayer or any contractor or subcontractor … shall be paid wages at rates not less than the prevailing rates” for that type of work in the region of the country. This is in accordance with the federal Davis-Bacon Act, which set the prevailing wage requirements.
What this means in practice is that no contractor is allowed to offer the government a better than average deal on the labor costs. A study by the Beacon Hill Institute found that prevailing wage rules increase wages by 20 percent on average and boost construction costs by 7 percent. Those additional costs fall on taxpayers.
The ostensible purpose of the prevailing wage rule is to ensure that construction workers are paid well. It also ensures that unionized contractors are not at a disadvantage when it comes to bidding for federal projects. The rules require nonunion contractors to pay their workers about the same they would have to pay if the workers were organized anyway. The companies therefore have less incentive to resist having unions. “Prevailing” is basically a euphemism for “whatever unionized workers get.”
“The robust investments included in this package will support and create good union jobs,” said BlueGreen Alliance, a coalition of union and environmental groups, in a letter to senators this month. The coalition includes the United Steelworkers, the International Union of Bricklayers, and the International Union of Painters and Allied Trades, among others. Note that it is not “jobs” in general but specifically “union jobs” that the legislation will create.
The prevailing wage rule is already required by the federal government under the Davis-Bacon Act, but it can be suspended if the president deems that necessary. It is unlikely that President Biden would ever do that. All of that being the case, why does the Inflation Reduction Act have its own prevailing wage language? Isn’t the language redundant? Yes, but this is what political types call “messaging.” Biden and congressional lawmakers are sending a signal to the union that they’re still buddies.
It’s also possible that that Inflation Reduction Act will outlast the present administration. It may take a while to dole out all of this money and the bill’s authors would rather not have a prospective administration take a different view on whether saving taxpayers a few dollars is a good idea.