“The Davis-Bacon Act of 1931 is a United States federal law which established the requirement for paying prevailing wages on public works projects. All federal government construction contracts, and most contracts for federally assisted construction over $2,000, must include provisions for paying workers on-site no less than the locally prevailing wages and benefits paid on similar projects.”
“Union supporters of Davis-Bacon point to a 2002 case known as “Brazier Construction vs. Elaine Chao, Secretary of the Department of Labor.” In it, Judge William B. Bryant (himself African-American) rejected that Davis-Bacon was a Jim Crow law. He stated: “Americans of all races were in need of aid from the government during the Great Depression. Congress enacted the DBA (Davis Bacon Act) to assure workers a fair wage, provide local contractors a fair opportunity to compete for local government contracts and to preserve its own ability to distribute employment and federal money equitably through public works projects. With the claim rejected, the plaintiffs did not appeal. Despite notable attempts to repeal the Davis-Bacon Act, the law for the most part continues to enjoy often bi-partisan local support across the nation.”
The above excerpt is taken from wikipedia.com as a general description of prevailing wage. Most of you outside of the construction field do not fully grasp the concept of prevailing wage, the consequence it places on the taxpayer, and the chilling effect it has on business. Therefore, I am offering you a small peak into the modern day Tammany Hall.
Since I am from Kentucky, I am going to use the state of Kentucky’s prevailing wage rates to formulate my argument.
In the state of Kentucky, prevailing wage rates are determined and set in each of Kentucky’s 120 counties. The wages are broken down by classification of work, i.e., electrician, general laborer, carpenters, cement masons, etc. Each work classification is then prescribed a wage rate per hour based on the general “prevailing wage” of the county. These wages are only payable to workers on public works projects, whether or not the project workforce is unionized or private, which are funded by taxpayer dollars. The set wages are reviewed periodically, county by county, and a new wage determination is made which usually raises the hourly rate for all categories of work. All county wage determinations for the state of Kentucky can be found at:
http://www.labor.ky.gov/ows/employmentstandards/prevailingwage/wagerates/
The general idea of the Davis Bacon Act is sound and helped early 20th century workers receive a fair and equitable wage for public works projects in their communities. Additionally, this legislation made it difficult for outside contractors to under bid local contractors with cheap labor, streaming north from poorer states in the south. During the Great Depression, the Davis Bacon Act provided a welcomed opportunity for all construction workers and helped pull the United States out of a depression ravaged economy. Woefully, the same cannot be said for the economy of today.
Workers should be justly compensated for work performed at a rate which the market can bear. Paying employees a fair an equitable wage is a fundamental characteristic in a free-market economy and a direct result of industrialization. With that said, the market is therefore responsible for setting wages for all workers. Modern day “prevailing wage” is nothing more than a union creation geared at choking out private competition and costing the local taxpayer billions of dollars. My assertion is counterintuitive to the aforementioned decision as handed down by Judge Bryant when stating prevailing wages provide local contractors a fair opportunity to compete for local government contracts. This may have been true in 1920’s America but not in America today. I will show you why.
The problem with the Davis Bacon Act inside the state of Kentucky today must be addressed using a two-pronged approach. The fundamental ideas of the Davis Bacon Act are:
1. Prevailing wages provide local contractors a fair and equitable opportunity to compete for local government contracts.
2. Tax payers will bear wages for general works projects far in excess of the industry average as set forth by the free market.
To further illustrate point 1, I am going to reference the prevailing wage rate for an electrician who is performing work on a state funded construction project in Rowan county. As set forth on August 17, 2007, an electrician doing work in Rowan county is to make $45.53 per hour. This wage consists of a base wage of $28.02 and a fringe benefit of $17.51. A private, non-unionized contractor must pay the electrician $45.53 per hour of work if the said electrician is doing electrical work on the project. A unionized contractor will pay the same electrician substantially less than the $45.53 per hour wage rate as the unionized employee will be charged for the fringe benefit. Simply stated, private contractors, who all ready pay fringe benefits (health insurance, vacation, life insurance, 401K, etc) as part of their over-head structure must still pay prevailing wage fringe benefits while the unionized contractor can extract the fringe benefit from the employee as payment for the same benefits, thus eliminating the overhead costs of said benefits. This decided advantage eliminates an even playing field and, in turn, gives unionized contractors the upper hand in obtaining public works projects.
With that being said, private contractors are still successful in competing with the union for public works projects. This is true due to the vast amount of public works projects available for bidding in a given time period. Whether or not a project is staffed with a private or unionized workforce, the cost to the tax payer is the same. This is solely because of the Davis Bacon Act and its chilling effect on the economy. This brings me to point 2.
Should the tax payer bear the cost of wage elevations directly associated with the Davis Bacon Act? Let’s go back to the electrician working on a public works project in Rowan county, Kentucky. As previously stated, the wage charged to the tax payer for each hour of work on this project is $45.53. If this electrician were to work uninterrupted for one year, this electrician would earn a yearly gross salary of $94,702.40. While this figure may seem high, it pails in comparison when looking at the job as a whole.
Let’s figure that the public works project in question is the construction of a large high school requiring 20,000 hours of electrical work from start to finish. The prevailing wage in the Rowan county is $45.53 so the cost to the tax payer on labor alone is $910,600. This figure does not include material costs or any other labor and material costs incurred on any other facet of construction.
So as educated and logically minded tax payers, you and I are expected to believe that electricians, based on the prevailing wages (accepted, market bearing wages of today) of a depressed eastern Kentucky county should earn somewhere in the neighborhood of 100K per year. That being said, the state of Kentucky sponsored website gohigherky.org lists the national average salary of the same electrician as $43,160.00 per year or an average wage of $20.75 per hour work. By using the national average salary for an electrician, the electrical work on the high school project is now reduced to $415,000 thus saving the tax payer $495,600 on electrical work alone. It is the American tax payer who is asked to unnecessarily bear this burden. This information can be easily accessed at http://www.gohigherky.org/career/careercenter/career_detail.asp?c=47%2D2111%2E00&pr=%2Fcareer%2Fcareercenter%2Fcareer%5Falpha%5Flist%2Easp?o
On all public works projects, across all scopes of construction, the Davis Bacon Act is creating an uneven playing field by allowing unionized contractors to receive public works projects at a reduced labor cost while costing the tax payer needless billions of dollars annually by fixing wages well above the invisible hand of the free market. One can only surmise that the Davis Bacon Act exists today solely due to politicians casting aside our tax dollars in a selfish attempt to cater to the powerful union lobbies. It is a measured attempt for politicians to retain their place in government. It is corruption paramount to Tammany Hall. It is collusion comparable to OPEC. American tax payers should demand accountability in the US treasury.
I will leave you with a few examples of national average wages for other professions as set forth on gohigherky.org:
Physician Assistants – $62,410.00 per year
Optometrists – $89,980.00 per year
Accountants – $50,690.00 per year
Lawyers – $91,920.00 per year
Chiropractors – $76,870.00 per year
I’ll let you draw your own conclusions.
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