The Federal Davis-Bacon Act: The Prevailing Mismeasure of Wages
In the United States, federal, state and local governments spend about $300 billion annually on construction projects. Because of their cost and visibility, public construction projects are often the object of criticism from politicians and pundits, a notable example being Boston’s “Big Dig,” known for its cost overruns and embarrassing, even deadly, structural failures.
The Prevailing Wage Law
One feature of public construction projects that the critics seem less willing to recognize, however, is that they function also as a costly welfare system for union workers. This feature stems from the federal Davis-Bacon Act, under which construction projects funded entirely or in part by the federal government must pay a government determined “prevailing wage” to the workers on the project. While the Davis-Bacon Act (DBA) gets periodic attention from Congress and various critics, there is a general unawareness of the arcane and generally unrepresentative statistical calculations that underlie its enforcement. The purpose of this study is to unearth the methods behind these calculations, to identify some of the anomalies they produce and to estimate what they cost taxpayers.
Prevailing wage laws permeate the federal and state statutes relating to construction. The federal government, 32 states and the District of Columbia require the payment of a prevailing wage for all workers employed directly on site for government-funded construction projects. The DBA, which was adopted by Congress in 1931 and subsequently much modified, provides the legislative authority for enforcement of the prevailing wage at the federal level and the basis for prevailing wages in the states.
Because prevailing wage laws establish a wage floor, they raise construction costs. The reason is twofold: First, the wage that “prevails” in a particular place at any snapshot in time might be greater than the wage that contractors would have to pay if, for example, they could hire cheaper labor from outside the area. Indeed, as we observe in our study, it is the very possibility that employers could hire cheaper labor that led to the passage of the DBA in the first place. Second, because the law is intended to reduce wage