Davis-Bacon Facts
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DAVIS-BACON ACT
Davis-Bacon Prevailing Wage Rates Are Not Synonymous With Union Wage Rates
The Davis-Bacon Act and more than 60 other federal statutes require construction contractors and subcontractors to pay their employees on federally assisted construction projects not less than the “prevailing wage” in the same locality.
· Some in Congress claim that this requirement means that contractors and subcontractors working on such projects are automatically obligated to pay union rates even though they are not party to a collective bargaining agreement.
· This claim is false and neither supported by law nor the facts.
· There is no statutory mandate that prevailing wages must be based on wages negotiated by labor unions.
· Moreover, the facts are that the procedure adopted by the U.S. Department of Labor (DOL) makes it extremely difficult for union wage rates to be recognized as the “prevailing wage.”
· DOL statutory mandate is to determine the “prevailing wage” for “corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in [the same locality] in which the work is to be performed.”
· Pursuant to this mandate, the Secretary of Labor has adopted a regulation, which defines the “prevailing wage” as the wage paid to the majority (more than 50 percent) of the laborers and mechanics in the classification on similar projects in the area.”
· In the event that the same wage is not paid to a majority of those employed in the classification, the Secretary of Labor’s regulation defines the “prevailing wage” as the weighted average of all the wage rates found to be paid to laborers or mechanics in same classification in the locality.
· Application of the Secretary of Labor’s definition of “prevailing wage” makes it virtually impossible for a union wage rate to “prevail” in a locality for Davis-Bacon purposes unless it is paid to more than 50 percent of the laborers or mechanics in a particular classification.
· DOL issues prevailing wage determinations for all 3,126 counties in the United States for each of four general categories of construction (building, residential, heavy and highway), or a total of 12,504 wage determinations.
· According to DOL, only 3,051 of those wage determinations (25%) are based entirely on union wage rates, another 4,151 wage determinations contain a combination of union rates and rates based on weighted averages, and the remaining 5,302 wage determinations are based entirely on weighted averages.
· Consequently, most Davis-Bacon prevailing wage determinations are not based on union wage rates.
The Davis-Bacon Act prevents competition for federal construction contracts from artificially depressing local labor standards. Nonetheless, critics of Davis-Bacon argue that the government
should use its bargaining power to cut local wage rates—by as much as 50 percent.
Studies show, however, that such a race to the bottom does not substantially cut public construction costs, but worker skills, experience and motivation drop dramatically.
· Subverting prevailing wage laws often leads to shoddy construction and
substantial cost overruns. Under prevailing wage laws, contractors are forced to
compete on the basis of who can best train, best equip and best manage a
construction crew…not on the basis of who can assemble the cheapest, most
exploitable workforce—either locally or through importing labor from elsewhere.
· A Davis-Bacon wage usually is not a “union” wage. The Davis-Bacon prevailing
wage is based upon surveys of wages and benefits actually paid to various job
classifications of construction workers (e.g. Ironworkers) in the community, without
regard to union membership. According to the Department of Labor, a whopping 72
percent of the prevailing wage rates issued in 2000 were based upon non-union
wage rates. A union wage prevails only if the DOL survey determines that the local
union wage is paid to more than 50 percent of the workers in the job classification.
Higher wages and skills result in greater productivity and lower cost. Productivity
is so much greater among high-wage, high-skill workers that projects using such
workers often cost less than those using low-wage, low-skill workers due to repairs,
revisions and lengthy delays. Opponents who claim that the government could save
billions by eliminating Davis-Bacon protections ignore productivity, safety, community
development and other economic benefits which contribute to the real cost-
effectiveness of Davis-Bacon. A study of 10 states where nearly half of all highway and
bridge work in the U.S. is done showed that when high-wage workers were paid double
the wage of low-wage workers, they built 74.4 more miles of roadbed and 32.8 more
miles of bridges for $557 million less.
Driving wages down will not help to balance the federal budget. Flawed analyses,
such as the Bluegrass Institute’s study, fail to take into account the spin-off economic
benefits of maintaining prevailing wages. When workers’ incomes go down, they have
less money to spend purchasing goods and making investments. When businesses
close or cut back as a result, tax revenues to the federal government decline and social
expenditures rise.
The Davis-Bacon Act improves local economies. Federal construction projects help
local economies, and so do prevailing wage laws. A study done by Lionel Richman,
LL.B., N.A.A. and Julius Reich, J.D. showed that in San Bernardino, California, the
prevailing wage law generates benefits to the community that are 2.4 times the amount
spent on the construction project. That’s because workers spend part of their income in
local shops and restaurants and pay local taxes, which re-circulates throughout the
economy.
Davis-Bacon Results in Increased Productivity. Construction workers in states with
prevailing wage laws are more productive. In 2002, the latest Census of Construction
data show that value added per worker in states with prevailing wage laws is 13% to
15% higher than in states without prevailing wage laws.
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A study of Kansas’ 1987 repeal of its state prevailing wage law shows that in the four years after repeal, apprenticeship training fell by 38% and minority apprenticeship training fell by 54%.
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Because workers are paid more under prevailing wages, contractors invest in better equipment and training which leads to a more productive workforce.
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Critics of prevailing wage regulations assume that lowering wages and cutting benefits will not erode training nor lead to an outflow of skilled workers. But that is the exact effect of repealing prevailing wage regulations.
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The loss of productivity associated with prevailing wage repeals means that the lower wages that ensue do not necessarily lead to lower costs.
Additional Economic Benefits of Prevailing Wage Laws
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