Davis-Bacon Relief for Washington

In the wake of Hurricane Katrina, President George W. Bush used his executive branch authority to suspend the Depression-era Davis-Bacon law that mandates so-called “prevailing wages” for all federal construction work projects. Since recent press reports predict at least $200 billion in new construction costs to rebuild the Gulf Coast states of Louisiana and Mississippi, this suspension stands to save the taxpayers tens of billions of dollars.

The Davis-Bacon Act, passed in 1931, requires all federal contractors to pay prevailing wages, almost always the local union wage, on construction projects of more than $2,000 that are wholly or partly funded with federal dollars. Many state legislatures, under pressure to protect union jobs and hostile to black immigrant labor from the South, also passed similar wage schemes known as mini-Davis-Bacon acts. These state laws also mandate that all state construction is subject to prevailing wage restrictions.

Free market advocates argue that prevailing wage laws destroy what is called “equilibrium” wages—those balanced by supply and demand. (When wages are artificially increased above what the marketplace would naturally support, employers cut back on projects, outsource projects overseas, or simply go out of business. Thus, prevailing wage laws decrease overall employment and create a tougher environment for employers to grow and expand their businesses.)

In 1945, our state enacted the Washington State Public Works Act, which was characterized as a “worker protection act.” This law mimics the federal version by requiring prevailing wages for all state public works projects or for maintenance of public buildings in Washington. Washington is one of thirty-one states with such laws. Ten states have repealed mini-Davis Bacon restrictions since their original passage.

Supporters of prevailing wage laws claim that Davis-Bacon requirements provide a “living wage” for construction workers. That argument certainly sells for those who believe that government should determine what a “living wage” is, and that taxpayers should pay for artificial wage supports for public sector construction projects. There is little evidence that prevailing wage does anything but increase costs to the taxpayer.

Critics of prevailing wage laws believe that they are antiquated wage supports born out of the anxiety and tumult of the Great Depression that drive up construction costs for the taxpayer and limit competition and innovation. The law certainly protects union jobs, and thus serves as a reliable stream of forced-union dues because of Washington’s status as a “closed shop” state. It is interesting to point out that many of the tax-and-spend politicians who support prevailing wage also benefit from union largess, in part, funded by forced dues extracted from these same construction workers.

Many construction contractors are small and “open shop” (meaning they don’t force their workers to pay tribute to a labor union to keep their jobs). To receive a Davis-Bacon contract, construction companies must expose themselves to high compliance costs, constant threats of union litigation, and persistent union harassment (Not to mention having to pay inflated wages and put up with inefficient work rules foisted on them by the union). These costs are all passed on taxpayer, in the form of inflated construction costs.

According to EFF research, the state of Washington could save several hundred million dollars per year by repealing our state’s Public Works Act. Since a substantial slice of state money is spent on K-12 school building and maintenance, suspension or repeal of mini-Davis Bacon could have a noticeable impact on classroom construction. Surely, building more classrooms for the same money is a worthy public policy goal that could be supported by legislators of all stripes.

A 1999 Mackinac Center for Public Policy study pointed out that in the 30 months that Michigan’s prevailing wage was suspended (during a legal challenge), there was a 48% increase in the rate of new construction jobs. The study also found that more than 11,000 new jobs were created, directly attributed to the law’s suspension. A disproportionate number of those new jobs were filled by blacks and other minorities, often grossly underrepresented in public sector construction projects. The same study also found that taxpayers are spending an additional $200 million dollars per year in inflated school construction and maintenance costs since the law was reinstituted.

University of Maryland economics professor Armand J. Thieblot once estimated that if federal prevailing wage laws were suspended for a period of five years, taxpayers could save over $3 billion in federal highway constructions costs and the contractors themselves would save almost $100 million in compliance costs.

A natural disaster, such as a severe earthquake or volcanic eruption, could mean tens of billions in reconstruction costs to Washington’s transportation and economic infrastructure. The bids for this reconstruction should be “open” and not subject to prevailing wage requirements that exclude smaller, non-union construction firms.

Public Policy Recommendations The state of Washington should consider suspending, or repealing, its own Washington State Public Works Act, especially if and when a major natural disaster such as an earthquake, tsunami, or volcano eruption occurs.

The governor should task a special commission to investigate how much prevailing wage restrictions are adding to the overall cost of K-12 school construction and maintenance.

Washington’s congressional delegation should push for repeal of the federal Davis-Bacon laws.

Not only will it leave the unions screaming but it will save the taxpayers HUGE amounts of money.

Yep. I ran nearly identical jobs in South Carilina and NYC. We had a non-union crew of 5 in SC, and 15 in NYC. The work in SC wqas completed in 4 mos, NYC 12. The total job cost in SC was about 20-25% of the NYC job.

The one good thing about union labor is they do train the guys quite well, and they are a readily available pool of well qualified labor to tap into. Generally, however, key personnel are given higher wages, per diem, etc, to truck around from job to job all over the country. On the SC job, my drill rig operator was from Boston, and the crane op from San Francisco, and received their respective home pay rates and benefits.

The assumption that this law depresses wages is wrong. In the NO area, there were no workers and hence no prevailing wage. So, we hear that illegals are commanding $15-17/hr to clean up trash. Suspending the law eliminated some bureaucracy that would have slowed down the clean up and has allowed wages to rise to meet demand. Skilled lasbor is probably priceless.

First off, I think the flow of illegals needs to be stopped. After that, I beleive in a market economy. If people do not feel theyare getting fair wages, they need to look elsewhere. When employers aren't getting the labor needed, they will pay more. Why the government supports anything but a free fair open market via david-bacon is wrong in my opinion.

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