It's Time to put Prevailing Wage on DOGE's "To Do" List

These federal laws make public works project more expensive

It’s important for our readers to remember that this publication is not designed to be a platform for discussions of national policy and politics, there are more than plenty of places that provide those discussions. Rather, this publication has always had a view for the issues that are facing our communities and our hometowns. These are topics that are terribly local and often miss the attention of those in more traditional media. Especially here in Miami County, with the reduction of local news, there are fewer and fewer places where the issues and stories facing our communities are given the property attention.

However, it is important to recognize that state, and yes, even national, policies can have impacts on our local community. When those large policies, often conceptualized and dreamed of at the national level, meet local communities, conflicts can often arise with implementation of such policies. In other words, It is at the local level where the proverbial rubber meets the road. And with that understanding, there is an opening for this publication to talk about those national policies that have local impacts.

As American society takes a new look at efforts to trim government largess and strive for a more efficient, yet effective government, citizens are getting a crash course in bureaucracy — largely thanks to the Department of Government Efficiency. Together, we are living in a world where everything the government does is on the table: agency budgets are getting slashed, jobs are at stake, benefits are getting a second look. It almost feels that the relationship citizens have with their federal government is being reexamined at almost every level.

And such a reexamination should not necessarily be frowned upon. While we could all hope for a more orderly or strategic approach to this work, this work is being done, nonetheless. And if I may be so bold, to offer my two cents, one area of government bureaucracy that needs a desperate look at are the current prevailing wage laws that are on the books, laws that far too often, drive the cost of much needed infrastructure costs higher and higher.

The most notable prevailing wage laws are more commonly referred to as Davis-Bacon. The Davis-Bacon Act, enacted in 1931, has been a contentious piece of legislation in the realm of federal construction projects for nearly a century. Originally intended to protect local workers from being undercut by migrant labor during the Great Depression, the Act mandates that contractors and subcontractors on federally funded construction projects pay their workers the "prevailing wage" for their job classification in the local area.

While proponents argue that it ensures fair compensation and maintains a skilled workforce, a growing body of evidence suggests that the Davis-Bacon Act significantly inflates the cost of public infrastructure projects, placing an undue burden on taxpayers and potentially hindering economic growth.

The history of the Davis-Bacon Act is rooted in the economic turmoil of the early 1930s. Introduced by Representative Robert Bacon and Senator James Davis, the Act was a response to concerns about out-of-state contractors bringing in low-wage workers and undercutting local labor markets. However, it's important to note that the Act's origins were not entirely altruistic. There are strong hints that reveal that racial animus played a role in its passage, with some congressmen explicitly stating their desire to prevent Southern black workers from competing with white labor in the North.

Over the years, the Act has been amended and expanded, with its provisions now applying to numerous federally funded or assisted construction projects; in other words, projects that are contracted locally, but have some federal money attached to them. The Department of Labor is responsible for determining the prevailing wage rates, which are supposed to reflect the average wages paid to workers in similar occupations within the same geographic area. However, the methodology used to calculate these rates has been a source of ongoing controversy.

Critics argue that the Davis-Bacon Act significantly increases the cost of public infrastructure projects, with estimates of the additional expense ranging from 7.2% to as high as 22%. A study by the Beacon Hill Institute found that the Act costs taxpayers an extra $21 billion annually and inflates construction workforce wages by 20.2% compared to local market averages. The Congressional Budget Office estimates that repealing the Davis-Bacon Act would save the federal government $24.3 billion in spending between 2023 and 2032.

The impact of these increased costs is far-reaching. Higher project expenses mean fewer public works can be undertaken with available funds, which often leads local governments to pass on necessary infrastructure improvements or be saddled with increased public debt. Furthermore, small businesses and non-union contractors often find it challenging to compete for federal contracts due to the administrative burden and inflated labor costs associated with Davis-Bacon compliance. This reduced competition can further drive up project costs and potentially decrease overall economic efficiency. Compliance with Davis-Bacon is often left to local government bureaucrats that often lack training and guidance on how to fully comply with the law and often have little ability to deal with prevailing discrepancies that may exist.

Moreover, the Act's wage determination process has been criticized for its lack of accuracy and timeliness. A Government Accountability Office report highlighted serious flaws in how wages are determined, noting that many wage rates are based on outdated or unrepresentative data. This can lead to artificially high wage rates that don't reflect true market conditions, further exacerbating the cost inflation problem.

The Davis-Bacon Act's impact extends beyond direct project costs. It can also lead to reduced employment opportunities, particularly for less skilled workers or those from disadvantaged backgrounds. By setting wage rates at levels that may be above market rates, the Act can price some workers out of the job market, paradoxically harming those it was originally intended to protect.

Proponents of the Act argue that it ensures quality work and fair wages, but studies have shown mixed results on these fronts. Some research suggests that prevailing wage laws have little to no impact on construction quality or worker safety, while potentially reducing overall employment in the construction sector.

The recent final rule issued by the Department of Labor in 2023, which makes significant changes to Davis-Bacon regulations, has further intensified the debate. Critics argue that these changes will only exacerbate the Act's negative impacts, making it more likely that union wage scales will be adopted as the prevailing wage even though only 11.7% of the construction industry is unionized.

As the United States faces significant infrastructure challenges and economic pressures, the cost implications of the Davis-Bacon Act cannot be ignored. While the intent to protect workers is laudable, the unintended consequences of artificially inflated wages and reduced competition may be doing more harm than good. A more balanced approach that ensures fair compensation for workers while also considering fiscal responsibility and economic efficiency is needed.

Granted, while the Davis-Bacon Act was born out of a desire to protect workers during the Great Depression, its continued application in today's economy is creating significant inefficiencies and unnecessary costs in public infrastructure projects.

As policymakers grapple with the need to modernize and expand America's infrastructure, a thorough reevaluation of the Davis-Bacon Act and its impacts on project costs, employment, and overall economic health is warranted, with the eventual goal of eliminating the onerous set of regulations. The goal should be to find a solution that balances worker protection with fiscal responsibility and economic growth, ensuring that public funds are used efficiently to build the infrastructure necessary for nation’s future. Davis-Bacon, in its current form, is not the way to do that.

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