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Davis-Bacon: Repeal and don’t replace

Budget hawks on Capitol Hill are scrutinizing wasteful mechanisms in surface transportation construction against the backdrop of President Donald Trump’s infrastructure investment plant. One of the easiest targets for stretching dollars from an expanded highway and bridge funding pool was noted here last month: A lifting of Barack Obama’s executive order fostering the use of wage-inflating project labor agreements on higher ticket federal construction contracts.

A second target surfaced days after the inauguration. Senator Mike Lee (R-Utah) introduced the Davis-Bacon Repeal Act—nixing the prevailing wage requirements in federally funded highway construction—alongside companion House legislation from Rep. Steve King (R-Iowa).

“Davis-Bacon is an 80-year-old wage subsidy law that requires all federally funded projects worth more than $2,000 to pay workers a so-called ‘prevailing wage,’” said Sen. Lee. “The ‘prevailing wage’ is determined not by market forces operating in reality, but by federal bureaucrats in Washington, D.C. As a result, federal contractors are charged, on average, a 22 percent premium on their labor costs above what private companies pay for the same project. Repealing the outdated, costly Davis-Bacon Act will give federal contractors the ability to hire more workers of all skill level, while lowering the overall costs of federal transportation construction projects.”

“I first dealt with Davis-Bacon wage scales when I started my construction company in 1975. The federal government dictated wage scale to all of my employees on federally funded projects,” recalls Rep. King. “Micromanaging and disrupting the efficiencies in our businesses has ultimately resulted in higher costs to taxpayers. We are bleeding red ink in the federal government. Rather than increasing costs by billions of dollars and restricting our free market, all that should be required is for the employer and the employee to agree on salary and benefits.”

Davis-Bacon discourages small contractors from bidding on federal construction projects due to enormous compliance burdens, Associated Builders & Contractors observes, and stifles contractor productivity by raising project costs and imposing rigid craft work rules that ignore skill differences. ABC has “long supported full repeal of the archaic 85-year old Davis-Bacon Act,” characterizing the U.S. Department of Labor (DOL) survey process behind prevailing wage calculation as “unscientific and fundamentally flawed.”

DOL never developed an effective process for determining market-rate wages, and relies on complex contractor surveys that feature disproportionate participation from well-connected unions, contends Senator Jeff Flake (R-AZ), whose Transportation Investment Recalibration to Equality Act (TIRE) suspends prevailing wage provisions on all federal highway construction contracts, and preceded the Lee and King bills.

The Government Accountability Office determined that DOL cannot even verify whether its own wage calculations accurately reflect local market rates, adds Sen. Flake, who told colleagues from the Senate podium: “While it may be well-intentioned, Davis-Bacon ends up eliminating decent-paying construction jobs and hampering infrastructure spending. And as many of us in this body look for issues to bridge the partisan divide, it turns out one of those issues is bridges, roads, dams, and other infrastructure projects. Fixing our nation’s crumbling infrastructure is a top priority for many in Congress, and the new administration has touted a large infrastructure package as one of its major agenda items … With a projected price tag north of $800 billion for highways and bridges alone, every federal dollar needs to be spent as efficiently as possible. The TIRE Act will return wage determinations for federal transportation projects where they belong—the market.”

Davis-Bacon’s wage distortions typically stop at the construction gate or site barrier, confining direct costs more to contractors than their concrete suppliers. The law nevertheless adds what ABC and the Congressional Budget Office estimate are billions in costs to federally funded infrastructure projects. Every dollar consumed in inflated wage scales adds up to fewer yards of ready mixed or tons of precast delivered to highway or bridge sites.