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.
