If, needing to move quickly in an emergency, one of your hands is tied behind your back, you should untie it. But once the emergency has passed, you might ask: “Why did I tie it in the first place?” That’s a question Congress should now ponder.
On September 8, President Bush suspended the Davis-Bacon Act, the federal “prevailing wage” law, in the areas affected by Hurricane Katrina. This is a welcome move in the effort to rebuild New Orleans and the Gulf Coast region, helping to create jobs in the hurricane-stricken areas. But if suspending Davis-Bacon is good for economic development and job growth in a disaster area, repealing it entirely would be good for the country.
Davis-Bacon requires federal contractors to pay the “prevailing” wage in a given locality as determined by the Secretary of Labor. Because this has typically been equivalent to the prevailing union wage, the law makes it harder for non-union contractors to compete.
Disaster-stricken areas need all the workers they can get. To meet that urgent need, any regulations that hinder hiring should be put aside.
The move has precedent. In 1992, President George H.W. Bush suspended Davis-Bacon in areas of South Florida and coastal Louisiana hit by Hurricane Andrew, as well as areas of Hawaii struck by Hurricane Iniki. However, a March 1993 Clinton Executive Order reinstated Davis-Bacon. (The lesson is hardly new — following the Great Fire of London in 1666, Parliament abolished the trade guild system to ensure a sufficient supply of skilled labor to rebuild the city.)
President Bush has done the right thing by suspending Davis-Bacon in the stricken areas. But, since this move recognizes that the Act hinders job creation, we should ask: If scuttling Davis-Bacon is a good idea for the Gulf Coast, why isn’t it a good idea for the rest of the country? Further, the law’s effect and ugly history suggests it is time for its repeal.
The Davis-Bacon Act, passed in 1931, was the culmination of four years of activism for “prevailing wage” legislation by politicians who were supported by unions seeking to exclude African Americans. In 1927, U.S. Rep. Robert Bacon introduced the bill that later became Davis-Bacon after some of his white constituents in Long Island, New York, complained about an Alabama contractor bringing Southern blacks to work on the construction of a Veteran’s Bureau hospital. New York’s existing prevailing wage law did not cover federal projects. The bill eventually passed Congress, and President Herbert Hoover signed it into law.
Contractors and unions were both unhappy with the Act, because the law did not provide for the prevailing wage’s determination. As a result, the law made it impossible for contractors to know what the prevailing wage would be when they began construction, and thus had no labor costs for factoring into bids. Unions did not like the fact that contractors could argue that the prevailing wage was lower than the union wage. Subsequently, Congress amended the law in 1935 to provide for predetermination of wages by the Department of Labor, which then issued regulations requiring prevailing wages to be set at union scale in any area in which construction was at least 30% unionized.
Davis-Bacon’s checkered history is well documented by George Mason University law professor David Bernstein in his book, Only One Place of Redress: African-Americans, Labor Regulations & The Courts From Reconstruction to the New Deal. As Bernstein notes, Davis-Bacon caused massive African-American unemployment by eliminating an important Depression-era incentive for hiring black labor: cost. “The only recourse African Americans had in a labor market dominated by exclusionary unions that demanded above-market wages was their willingness to work for less money than the unionists,” says Bernstein. By mandating uniform wages, Davis-Bacon “prohibited African Americans from exercising that leverage.”
Now, unions no longer discriminate against African Americans. But union-backed “prevailing wage” laws, by artificially raising labor costs, discriminate against low skilled or unskilled workers, taking them out of competition for many jobs.
With tens of thousands of people newly unemployed — and some of them resettling around the country — now is a crucial time for Congress to revisit Davis-Bacon. Untying the hands of contractors willing to hire willing, currently unemployed workers would help keep the effects of Hurricane Katrina from spreading any further throughout the U.S. economy. Hands work better untied.
(Special thanks to CEI Senior Fellow Iain Murray for the London info.)
Ivan Osorio is Editorial Director at the Competitive Enterprise Institute.
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