‘Better paid, more skilled workers are safer, work more
efficiently, and deliver a better product’

WASHINGTON, D.C. – The federal Davis-Bacon Act has established a prevailing wage rule for building trades workers on taxpayer-funded construction since 1931. In recent years efforts to outright repeal the law have failed, in good part due to relatively minor, but important, support from Republicans in Congress.

But the attacks continue. A recent Government Accounting Office (GAO) report found that irregularities and the sheer lack of the voluntary employer wage reports have resulted in wildly inaccurate prevailing wage levels across the U.S. The building trades have agreed that wage rates need to be properly and fairly updated – only a few years ago we reported that in some of Michigan’s rural counties, a lack of current wage surveys meant the prevailing wage for at least one trade was only $9 per hour.

Today, some Republicans are using the GAO report as a means to attack prevailing wage – even though an outdated, inaccurate prevailing wage almost certainly means that wage rates are set too low. The GAO report basically recommended that the Labor Department improve its recordkeeping practices to obtain better information.

A hearing was held on April 14 in front of the U.S. House Committee on Education and the Workforce, Workforce Protections Committee. It was chaired by Tim Walberg, a Republican from Michigan’s 7th District. Following are excerpts of comments made at the hearing from Walberg, and from Roy Eisenbrey of the Economic Policy Institute, a think-tank.

“Established by the Hoover administration in 1931,” said Walberg in his introduction, “the Davis-Bacon Act requires workers be paid the ‘prevailing wage rates’ on federal construction projects costing taxpayers more than $2,000. Prevailing wages are determined through a complex system of wage surveys administered by the Department of Labor.

“The GAO revealed problems with accuracy, quality, bias, and timeliness of the wage data. Of the surveys reviewed, one in four of the final wage rates were based on the wages of just six or fewer workers. Forty-six percent of the prevailing wages for non-union workers were based on wages reported 10 or more years ago.”

Walberg continued: “In 2009 alone, federal construction and rehabilitation projects totaled roughly $220 billion. Are these taxpayer dollars being well spent, and if not, then what should be done about it? Those are the questions we hope to answer today.”

The Economic Policy Institute has long been a champion of prevailing wage laws, and EPI Vice President Ross Eisenbrey was invited to testify before the subcommittee.

“Congress enacted the Davis-Bacon Act,” Eisenbrey said, “to assure workers on federal construction projects a fair wage and to provide local contractors a fair opportunity to compete for construction contracts. The requirement to pay no less than locally prevailing wages is essential to protect local standards and to prevent competition based on low wages rather than on productivity, efficiency and quality.

“The Act has succeeded in those goals for 80 years, so it’s easy to forget its importance. Like many things in life, it’s only when it’s gone that we realize just how valuable its protections really are.”

He continued: “Hurricane Katrina is a case in point. After the hurricane struck the Gulf Coast, President Bush suspended the Act by executive order. What happened? Workers didn’t get a fair wage because contractors could bid the work at the minimum wage instead of the prevailing wage. They brought in itinerant crews from outside the Gulf Coast – even from outside the U.S. – and paid rock bottom wages. Roofers, for example were reportedly hired at $60 per day.

“Local contractors couldn’t compete and got passed over at their hour of greatest need and opportunity. Stories in the Baltimore Sun, Atlanta Journal-Constitution and New Orleans Times-Picayune reported on the unhappiness of local businesses that watched multinationals sweep in and take millions of dollars of federal clean-up contracts. An editorial in the Times-Picayune under the headline ‘Rebuilding effort should be localized’ hit the nail on the head:
“(W)e are already moving quickly and boldly in the wrong direction…(Y)ou can hardly entice (our citizens) back if you’re only willing to pay poverty wages. But in the wake of the disaster, President Bush suspended the Davis-Bacon Act….In
essence, there’s no ceiling preventing sky-high profits for these (out-of-state) contractors and not much of a floor to ensure that wages to workers are not abysmally low. There is an intelligent way to rebuild our city. This, however, isn’t
it.”

Eisenbrey defended the federal prevailing wage law, pointing out that the Davis-Bacon Act “incentivizes” apprenticeships by permitting payment of lower wage rates to employees enrolled in bona fide apprenticeship programs. Contractors can submit lower bids when they employ bona fide apprentices as part of their workforce. Critics, he said, claim these goals are achieved at too high a price, that the act raises the cost of construction, benefiting the workers at the expense of taxpayers.

“But a great deal of empirical research refutes the claim that prevailing wage laws inflate construction costs,” Eisenbrey said. “Work by Professors Peter Philips and Garth Magnum of the University of Utah, by Prof. Dale Belman of Michigan State University, and Prof. Hamid Azari-Rad of the State University of New York, among others, shows that prevailing wage laws lift workers’ wages and compensation without significantly increasing construction costs.

“Higher wages lead employers to invest in labor-saving tools and equipment, which increases productivity. Better paid, more skilled workers are safer, work more efficiently, and deliver a better product. Prof. Philips has calculated that construction workers in states with ‘little Davis-Bacon’ prevailing wage laws are more productive, on
average, than construction workers in non-prevailing wage states. Their value added is 13-15 percent higher per employee.

“Given that construction wages and benefits are only about 30 percent of construction costs, it is easy to see how higher productivity offsets the increased cost of prevailing wages.”