Report contends Davis-Bacon stymies competition, costs taxpayers; but authors acknowledge shortcomings

Three years since Wisconsin lawmakers repealed prevailing wage on state and local jobs in Wisconsin, critics of the policy are still debating if the state is better off without it.

On Thursday, the Wisconsin Institute for Law and Liberty released a report taking a shot at the final vestige of the policy in Wisconsin: the prevailing wages required on federally funded jobs by the Davis-Bacon Act. WILL, as the group is known for short, concludes that repealing prevailing wages — at least on government-supported housing projects — would not only save taxpayers money in many parts of the state but also make it easier for non-union companies to compete for government jobs. Even the authors of the report, though, acknowledge certain caveats to their findings.

For critics of the report, those disclaimers amount to fatal flaws. Andrew Disch, political director of the Northcentral States Regional Council of Carpenters, noted that a survey conducted as part of the report reached out only to companies that are members of the Associated Builders and Contractors — a mostly non-union trade group.

“This is nothing more than a Survey Monkey homework assignment, it is not research,” he said.

Will Flanders, research director at WILL, said he and his colleagues decided to poll ABC members because they needed responses from Wisconsin contractors of varying size. Of those surveyed, 67.5% said they’d be more likely to bid on projects if Davis-Bacon were repealed. WILL argues that more competition for projects ultimately leads to lower costs for taxpayers.

“Overall, the response from them is that this law is an impediment to taking on contracts,” Flanders said.

Critics meanwhile also questioned WILL’s reliance on figures from the Bureau of Labor Statistics. BLS data were used to gauge the effect of mandatory prevailing wages on five trades in the residential sector of the Wisconsin construction industry. Specifically, the report found that four trades — carpentry, roofing, plumbing and sheet-metal working — were paying higher wages on prevailing-wage jobs, ultimately costing taxpayers more. Electrical work was the sole exception.

WILL also used BLS data to assess the effects of mandatory Davis-Bacon wages. Its findings suggest that, in southeast Wisconsin at least, Davis-Bacon boosted wages by 20% over average wage rates reported by the BLS. In northeast Wisconsin, however, wages paid according to Davis-Bacon were slightly less than those reported by the BLS.

Critics were quick to contend that BLS data should never have been used for this purpose in the first place. Robb Kahl, executive director of the Construction Business Group, a union-backed trade group, said the figures and resulting conclusions are misleading for several reasons. The bureau’s numbers, for one, don’t take into account pension payments, health benefits or training-fund contributions. Nor, Kahl said, does the BLS use a large enough sample to produce meaningful results, take enough account of construction outside the residential sector or draw a distinction between journeymen and apprentices on prevailing-wage jobs.

Kahl further faulted WILL’s analysis of the data. He noted that the bureau collects wage data according to companies’ business addresses — not the actual job sites where work is being performed. Kahl noted that

Erica Groshen, the former head of the Bureau of Labor Statistics, testified before a U.S. House panel in 2013 that the bureau has no role in setting prevailing-wage rates or choosing which data should be used to do so.

“The use of BLS data by Davis Bacon critics is common and has been rejected repeatedly by those who acknowledge and care to understand that the BLS data has significant limitations,” Kahl said.

Flanders acknowledged that BLS data by no means offer a perfect way of gauging the effects of Davis-Bacon wages.

Other recent studies have attempted to provide answers to similar questions. A 2018 study by the Illinois-based Midwest Economic Policy Institute found Indiana’s 2015 repeal of prevailing wage didn’t drive down costs of construction for taxpayers but did decrease wages for construction workers by 8.5% on average and by 15.1% for the state’s lowest-paid workers.

A 2015 study from the Wisconsin Taxpayers Alliance, meanwhile, found prevailing wage drives construction costs 44% over market rates on public projects. That report was commission by the ABC of Wisconsin.

John Schulze, legal and government affairs director at the ABC of Wisconsin, said the group helped circulate WILL’s Davis-Bacon survey to contractors but otherwise had no hand in the resulting report. He said it’s clear that doing away with the state and local prevailing wage in Wisconsin has accomplished what he and others had hoped for and that ABC members now have an easier time competing for government contracts.

“The (WILL) report reinforces what we always thought,” Schulze said. “You’re going to see more contractors bid on federal projects if they get rid of Davis-Bacon and that will have lower costs to taxpayers because you’re going to have more people competing for work.” Follow @natebeck9