Case Overview, Prevailing Wage Rules for Building Trade Workers in the Davis-Bacon Act

This document provides background information and summarizes the debate over prevailing wage rules. The links to the left will lead you to public documents that we have found.

           One of the many problems that emerged during the Great Depression is that people were desperate for work. With a huge swath of the population unemployed and no significant welfare system in place, men and women would take just about any job at any pay. The Davis-Bacon Act, passed in 1931 during Herbert Hoover's administration, was an attempt to put a wage floor into place. The idea was roughly similar to a minimum wage, which was passed later in 1938 (and set the minimum wage at .25 cents an hour). The Davis-Bacon Act was narrower, implementing a minimum wage for workers on federally funded building projects. Unlike the national minimum wage, however, it set the wage rate by community, and the level for each community was set at the prevailing wage for that area.

           The prevailing wage on building projects is strongly influenced by the wages paid to union construction workers. This is a vitally important policy for unions as it makes it difficult for nonunion workers to compete with union workers on federally-supported projects. It is also difficult for construction companies to build a substantial project without any union labor as unions are a reliable and efficient source of highly trained and experienced workers in all the specializations needed to put up a building. Moreover, strikes and job actions can stall a project and individual construction companies may prefer to pass on higher wages to their customers than to try to circumvent union preferences.

           Since Davis-Bacon was passed, 60 additional laws have been instituted prevailing wage standards for other industries. Thus, over time, wage rates influenced by labor union agreements have been implemented for a wide variety of federally funded programs. Not surprisingly, prevailing wage type laws are not popular with business associations. For years lobbyists representing business have complained that these prevailing wage policies are inflationary. As one lobbyist told us, "The market should set wage rates. The Davis-Bacon system is . . . costly."

           National labor unions regard Davis-Bacon as sacred and are willing to do whatever they can to defend it against repeal or even encroachment. Without Davis-Bacon wages would fall. Unions reject the idea that Davis-Bacon is a problem because it raises wages artificially high and is inflationary. In an interview a labor lobbyist said their main argument in trying to preserve Davis-Bacon is that "we must not allow the standard of living to drop in communities around the country." Efforts made during the 1990's to repeal Davis-Bacon failed and at the time of our field research, the attack on the law was guided by an incrementalist philosophy. Business lobbyists hoped that they would be able to restrain Davis-Bacon by getting the government to enact small changes that could be sold as common sense reforms. For example, business lobbyists were pushing for a higher threshold to trigger Davis-Bacon regulations (currently just $2000 per project).

           Another idea advocated by business representatives was that the measurement of "prevailing wage" is methodologically flawed. Critics of Davis-Bacon believe it overstates the true average of pay at relevant work sites. During the 106th Congress lobbyists on both sides of Davis-Bacon closely followed developments in Congress, but no major Davis-Bacon legislation emerged. Suggestions by critics that the wage surveys be redesigned were rejected by the Department of Labor. Finally, rulemaking in the Department of Labor extended the reach of Davis-Bacon, pleasing organized labor.

           The debate over Davis-Bacon is far from over. In the wake of Hurricane Katrina, President Bush used emergency powers to issue an executive order exempting all construction projects in storm-damaged areas of Louisiana, Mississippi, Alabama, and south Florida from prevailing wage requirements.