Today there is a new and more compelling reason to keep Davis-Bacon and prevailing-wage laws.
The unexpected result of Davis-Bacon and prevailing-wage laws is that they are empowering careers for the American disadvantaged worker. With advances in technology and with laws requiring government agencies to collect wage and worker data, local communities are taking advantage of this information to ensure their worker-hiring programs are successful. The results have been transformative.
Government agencies can now not only track wages; they can also keep track of how many people from various groups are being hired. Members of some of these groups have historically not been seen in large numbers in the construction industry. Meanwhile, inner cities are struggling economically and unemployment is running rampant in minority segments of our society.
Cities and public agencies are responding by attaching hiring goals to public-works projects. These call on contractors to hire local, underrepresented and economically disadvantaged workers.
Prevailing wages and Davis-Bacon laws have enabled these workforce programs to gain visibility and transparency through the requirement of certified payroll reporting. These reports have proved to be an invaluable means of tracking workforce goals, since information about workers’ sex, ethnicity and zip codes must also be submitted.
This increases the visibility of these targeted workers and shows how hiring them has transformed local economies. Technology has allowed statistical tracking, giving transparency to each program’s success and spotlighting areas that still need improvement.
In 1931, the Davis-Bacon Act sought to protect both federal construction workers and the public from greed-driven contractors. Thirty states have also passed prevailing-wage laws that accomplished the same mission in local communities. The purpose of these laws was to lay down a level playing field for bidders so that contractors would be competing on their skill, productivity and safety rather than seeking to submit low bids by paying workers below-the-poverty-line wages.
Unfortunately, Davis-Bacon has recently been accused of escalating construction project costs and now is in danger of being repealed. Constituents of the movement against Davis-Bacon allege that removing prevailing-wage requirements can reduce construction costs by 20 percent. Basic math demonstrates that this claim is seriously flawed.
On average nationally, 23 percent of construction projects’ costs consist of labor costs and 77 percent of material costs. Studies have suggested that, on average, the prevailing-wage rate is 17.5 percent higher than the free-market rate for any given craft and classification; however, research has also found that prevailing-wage jobs are completed 20 percent faster because the workers employed on them are more productive. This greater productivity from more skilled workers offsets the higher prevailing wages that are paid per hour.
For the elimination of prevailing wages to cause projects’ costs to decrease by 20 percent, labor rates would have to be at least 80 percent higher on average on public projects.
Repealing Davis-Bacon and prevailing wage laws would be detrimental. It would result in $5.3 billion in lost federal tax revenue since contractors who do not pay prevailing wages would also pay less in taxes. Equally important, there would be far fewer jobs for disadvantaged American workers.
Mark Douglas is the chief executive of LCPtracker, Inc., a California-based software service provider specializing in construction-site compliance.