Davis-Bacon and Union handouts

davis-baconWe have all seen how unions have the democrats in their pockets (or vice versa…I’m not sure which it is); today I would like to take a look at one little piece of legislation that keeps the political donations flowing from the construction unions…The Davis Bacon Act.

If you are not in the construction industry, it is likely that you have never heard of the Davis-Bacon Act. Passed by Congress in 1931, this act requires private contractors to pay “prevailing wages” to employees on all federally funded construction projects over $2000. So what are prevailing wages? It is determined by the department of labor. That’s right…if you want to bid on a government construction job, the Department of Labor, the same department that sees its job as expanding unions, is going to tell you how much you can pay your employees.

When the Department of Labor calculates prevailing wages, it does not use a scientific formula to randomly sample wages in the area surrounding the construction project. Instead, it picks and chooses what companies to sample wage rates from. The survey form sent to companies is also self-reported, which means that only companies that take the time to fill out the form have their wages reported. Curiously, the prevailing wages typically match the rates that the local construction unions receive (funny how that works).

So here is how things end up going on federally funded construction (and having worked construction for a few years, I have seen this in action). Unskilled construction workers have one clear advantage over their skilled, unionized competitors: They’re willing to work for less money. But Davis-Bacon destroys that advantage. After all, why would contractors working on a federal project hire any unskilled workers when the government forces them to pay all of their workers what amounts to a union wage? Contractors make the rational choice and get their money’s worth by hiring skilled unionized labor even when the project calls for much less.

While unions will try to make the case that the taxpayer gets more value for the dollar out of skilled worker than a non-skilled one, that argument just does not hold water. Having worked construction for a good number of years, I can tell you there are plenty of jobs that do not require a skilled worker. For example, suppose we are talking about frame construction; you may have laborers that spend all day cutting lumber for the framing crews. These lumber-cutters need possess no special skills; once taught how to use a saw and tape measure, anyone can do this job.

Davis-Bacon is pure special-interest, pro-union legislation. And it hasn’t come cheap for taxpayers. According to research by Suffolk University economists, Davis-Bacon has raised the construction wages on federal projects 22 percent above the market rate. A study by the Heritage Foundation finds that repealing Davis-Bacon would have saved taxpayers $11.4 billion in 2010 alone. Alternatively, had government contractors instead hired workers based on the average construction wages, 160,000 new workers at no additional cost, could have been hired in 2010. That would have gone a long way toward the unemployment problem, something President Obama claims to care deeply about.

As if Davis-Bacon were not bad enough, there has been a de-facto extension of Davis-Bacon…the American Recovery and Reinvestment of Act of 2009, also known as the stimulus bill. According to an All-Agency Memorandum issued by the Department of Labor, Davis-Bacon now applies to all “projects funded directly by or assisted in whole or in part by and through the Federal Government.” What this means is that if a single dollar of stimulus money is accepted for a state or local project, all contractors must comply with Davis-Bacon. In effect, by accepting stimulus money, a state project could end up costing the state more than without the stimulus money because they must now comply with Davis-Bacon.

With the federal debt now over 16 trillion, we can no long afford special interest handouts. The only way we are going to be able to tackle this debt is if we find every possible way to cut the costs of the federal government. This means no more Davis-Bacon; it is time for that law to go.



Blogger, writer, patriot, and freedom-loving guy. Founder of Freedomredux.com, and the author of the FreedomRedux novel series.

AJ Reissig – who has written posts on FreedomRedux.

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One Comment

  • Great information. A recent post in my GSA Contract Blog talks about the penalties involved with Davis Bacon Act failure.

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