Davis-Bacon Act

views updated

Davis-Bacon Act

United States 1931

Synopsis

In 1931 the U.S. Congress passed the Davis-Bacon Act, which is still in effect in modified form. The act requires certain private contractors working on federal construction projects to pay their workers at least locally prevailing wages, as determined by the U.S. Department of Labor (which has used union pay scales as its guide), for the type of work being performed.

The Davis-Bacon Act was enacted to prevent nonlocal contractors from "invading" a region, using cheap labor, and disrupting local wage rates. In 1931 the use of immigrant and African American migrant workers, often far cheaper than local unionized workers, was the primary issue. As a result, some parties then and now have decried the act as a "Jim Crow" law. Since its passage, the Davis-Bacon Act has been a favorite of organized labor, for obvious reasons. In addition, several states have prevailing wage statutes that apply to nonfederal public work.

Timeline

1915: A German submarine sinks the Lusitania, killing 1,195, including 128 U.S. citizens. Theretofore, many Americans had been sympathetic toward Germany, but the incident begins to turn the tide of U.S. sentiment toward the Allies.
1920: League of Nations, based in Geneva, holds its first meetings.
1925: European leaders attempt to secure the peace at the Locarno Conference, which guarantees the boundaries between France and Germany, and Belgium and Germany.
1927: Charles A. Lindbergh makes the first successful solo nonstop flight across the Atlantic, and becomes an international hero.
1930: Naval disarmament treaty is signed by the United States, Great Britain, France, Italy, and Japan.
1930: Collectivization of Soviet agriculture begins, and with it one of the greatest crimes of the twentieth century. In the next years, as Soviet operatives force peasants to give up their lands, millions will die either by direct action, manmade famine, or forced labor. Overseas, however, and particularly among intellectuals and artists of the West, Soviet collectivization and industrialization are regarded as models of progress for the world.
1930: Pluto is discovered.
1933: Newly inaugurated U.S. president Franklin D. Roosevelt launches the first phase of his New Deal to put depression-era America back to work.
1935: Second phase of New Deal begins with the introduction of social security, farm assistance, and housing and tax reform.
1940: Hitler's troops sweep through western Europe, annexing Norway and Denmark in April, and in May the Low Countries and France. At the same time, Stalin—who in this year arranges the murder of Trotsky in Mexico—takes advantage of the situation to add the Baltic republics (Latvia, Lithuania, and Estonia) to the Soviet empire, where they will remain for more than half a century.
1945: April sees the death of three leaders: Roosevelt passes away on 12 April; the Italians execute Mussolini and his mistress on 28 April; and Hitler (along with Eva Braun, propaganda minister Josef Goebbels, and Goebbels's family) commits suicide on 30 April.

Event and Its Context

Origins and Ideas: The Prevailing Wage Concept

The Davis-Bacon Act and various related laws, together known as DBRA, comprise the "prevailing wage" law for the federal government. The concepts of a "prevailing wage" and a "living wage" law are related but not identical. The living wage movement is of recent origin, usually manifests itself on a local level, and calls for private companies working with or for the locality in some way to grant some of their workers a higher minimum wage, usually based on the local poverty rate. The prevailing wage is an older concept, usually applies specifically to construction and other public works projects, and requires that workers performing government contracts be paid at least the locally prevailing wage rate for the type of work they are performing.

The first prevailing wage law in the United States was a 1891 Kansas statute, enacted as one of a series of reforms that mainly followed a long-standing American Federation of Labor legislative program. Moral and economic theories were the foundation of many labor reforms of this period. The moral theory held that it was simply wrong to condemn workers to poverty in the name of cutting costs. The economic theory held that treating workers well could be positive economically, as they would then become more productive and better able to contribute to the economy.

The motivation behind the enactment or preservation of prevailing wage laws in particular appears to be multilayered. Many desired to use government's position as a prominent "buyer" of various services to protect local wage standards against the possibility of cheaper, mainly nonunion labor from outside a community being hired to perform a government contract and disrupting local pay scales. As a general rule, governments are legally obligated to award contracts to the "lowest qualified bidder," thus making the described situation a distinct possibility, especially in construction, wherein wages tend to be higher, workers more unionized, and nonlabor costs more fixed than in other sectors. Labor also feared that these cheaper outof-area contractors would be less qualified and do poorer work than local contractors, especially unionized ones. Finally, some worried that the cheaper contractors may be less concerned with worker health and safety, thus indirectly creating an economic drain on the community.

Some have argued that, in many cases, the initial enactment of many of these laws had an at least partially racist intent, as the nonlocal labor at issue, in many places, consisted of African Americans and recent immigrants.

A Brief History of the Davis-Bacon Act

The idea of a national prevailing wage law dates back around the time of the Kansas statute, but it was not considered seriously until 1929, when Republican representative Robert Low Bacon, representing a district on New York's Long Island region, introduced a bill. In Bacon's district, a Veterans' Administration hospital was built in 1926, using nonunion laborers that were directly imported from the South, housed on-site by the contractor, and paid wages that were far beneath the prevailing wages of the community. Many, if not all, of these workers were African American. References to this fact during the 1931 debates on the Davis-Bacon Act are in large part responsible for the act's reputation in some quarters as a kind of "Jim Crow" law.

Bacon originally proposed to enact legislation to apply state wage laws to federal construction projects. New York had had a prevailing wage statute for some time. Bacon's bill failed for several years in a row, apparently because of the prominence of laissez faire economic thinking at the time. However, the perception that the Great Depression represented a failure of laissez faire economics facilitated a change in American thinking about government regulation of the economy. The depression caused a great deal of wage deflation, and any measure that might inflate wages suddenly seemed rather reasonable. A modified version of Bacon's bill found a Senate sponsor, Republican senator James J. Davis of Pennsylvania, a former secretary of labor. Although the act had other provisions, it was the prevailing wage concept that garnered the most attention.

Debates over the act, compared to more contemporary debates over its efficacy, were in the main relatively mild. The bill was enacted, with little apparent fanfare, on 3 March 1931 (PL 71-798). It was regarded as flawed, in large part because it was read to provide only for the awkward "post-determination" of prevailing wage rates; that is, after a project was completed, the Department of Labor would determine whether prevailing wages had been paid and would then seek redress for workers in those instances in which they had not been fairly compensated according to the terms of the act. Further, the act contained little if any in the way of enforcement or punishment mechanisms. After several attempts, Congress amended Davis-Bacon in 1935 (PL 74-403) into the form in which it has more or less stayed. Around 60 other acts have been enacted to apply the prevailing wage concept to various federal government contracts. Together, these statutes are known as DBRA (Davis-Bacon and Related Acts).

DBRA in the Twenty-first Century

By the early twenty-first century, the Davis-Bacon Act was located in 40 USC 276a et seq, and the related acts were found in various places. DBRA has the following main provisions, as described by the United States Department of Labor:

Covers contractors and subcontractors performing federal construction contracts valued at $2,000 or more
Requires all covered contractors or subcontractors provide prevailing wages and prevailing benefits for the kind of work being performed in the area in which it is being performed
Specifies that certain apprentices and trainees can be paid a lower wage
Requires that covered contractors and subcontractors pay employees weekly and submit various payroll records to the contracting agency
Establishes various reporting and enforcement requirements and penalties

The Ongoing Controversy

DBRA, the various state prevailing wage laws, and the prevailing wage concept in general have become emotional issues for both sides of the debate. The following summary of the arguments opposed to and in favor of the Davis-Bacon Act is drawn from various sources, but the categories are mainly derived from a 1978 Congressional Research Service report.

Opposed to:

The act was a depression-era measure that has outlived its usefulness. The wage deflation brought about by the Great Depression has long since passed.
The act interferes with the workings of a free competitive market. "Pure market" forces should determine the wages for construction projects, government or otherwise. The degree to which prevailing wage determinations tend to rely on union pay scales only makes matters worse.
The act is inflationary. Prevailing wage laws by their nature push wages beyond market level and thus contribute to inflation, generally as well as in construction.
The act gives an unfair advantage to unionized contractors. "Open shop" nonunion contractors, used to paying lower wages and operating with more flexibility, will not be able to meet the requirements of the act as well as will unionized contractors and thus are shut out of public works projects.
The act impedes the entry of minority groups into the construction industry. Some data suggest that minorities are better represented in nonunion construction shops. Favoring unionized shops may therefore result in the exclusion of African American workers. Further, some statements made during the 1931 debates on the Davis-Bacon Act may be read as indicating that the act was intended to give white workers an edge over lower paid African American workers.

In favor of:

The act was more than a depression-era measure, and the need for it has not diminished. The prevailing wage concept predates the Great Depression. Further, construction workers may make high wages, but their work is seasonal; incomes can be less, or zero, during the off-season. Hence, the higher wages are needed for the well being of the workers, and this is perennial to this industry regardless of depression or other economic circumstances.
The act prevents cutthroat competition and promotes fair competition based on decent labor standards. Labor is among the easiest places to cut costs on a construction project. The market has already decided upon a fair construction wage. Without a prevailing wage law, the "lowest qualified bidder" principle would allow government in effect to depress artificially the local market wages and would promote contractors that cut costs at the expense of worker health, welfare, and safety.
Paying the prevailing wage is simply a long-established federal government policy, even on projects to which none of the DBRAs applies.
The act is not inflationary and may in the long run reduce costs by promoting labor peace, helping to keep up a decent level of productivity, and reducing the "costs" of decreased worker safety.
The act's repeal or weakening could adversely impact apprenticeship programs in the construction industry, and thus hurt minority groups.

The Impact of the Act

Opinions regarding the impact of the Davis-Bacon Act are as diverse as those regarding its efficacy. The Congressional Research Service once admitted that it was basically impossible to determine exactly the economic impact of the Davis-Bacon Act and that the estimates on both sides of the argument were equally flawed.

The impact of the act, in some areas that are not specifically economic, is clearer. For example, the act has probably helped labor unions (though to what extent is impossible to determine) to maintain a foothold in an era that is hostile to them and their interests. It has probably played a role in maintaining construction wages at a relatively high level.

In the past 10 years or so, prevailing wage requirements have indirectly promoted the use of Project Labor Agreements (PLAs, also called Pre-Hire Agreements, or PHAs) in government construction contracts; such agreements have been common in the private sector for several decades. A PLA is an agreement between a contracting entity, such as a state or municipal government, and local labor organizations to either use union labor, to use contractors that agree to abide by union rules, or contractors that agree to come to terms with local unions over the rules of the project. PLAs are related to Davis-Bacon because they can be a shortcut to abiding by the prevailing wage requirement.

Key Players

Bacon, Robert Low (1860-1919): A Boston native, a Harvard graduate, and a Republican, Bacon represented a House district in the Long Island region of New York State from 1923 until his death. He was a colonel in the United States Army and is buried at Arlington National Cemetery. The Davis-Bacon Act appears to have been his primary achievement in the House.

Davis, James John (1873-1947): Born in South Wales and immigrated to the United States at the age of eight, with his parents, Davis performed a number of blue-collar industrial jobs, eventually moved to Pennsylvania, and served as secretary of labor from 1921 to 1930 under presidents Harding, Coolidge, and Hoover. In 1930, he was elected to the United States Senate as a Republican to fill a seat vacated by death. He served from 1930 to 1945, when he lost a reelection attempt. The Davis-Bacon Act appears to have been his primary achievement in the Senate.

Bibliography

Books

Belman, Dale, and Paula B. Voos. Prevailing Wage Laws in Construction: The Costs of Repeal to Wisconsin.Milwaukee, WI: The Institute for Wisconsin's Future, 1995.

Bernstein, David E. Only One Place of Redress: African Americans, Labor Regulations, and the Courts, from Reconstruction to the New Deal. Durham, NC: Duke University Press, 2001.

Gould, John P., and George Bittlingmayer. The Economics of the Davis-Bacon Act: An Analysis of Prevailing-Wage Laws. Washington, DC: American Enterprise Institute, 1980.

Thieblot, Armand J. Prevailing Wage Legislation: The Davis-Bacon Act, State "Little Davis-Bacon" Acts, the Walsh-Healey Act, and the Service Contract Act.Philadelphia, PA: The Wharton School Industrial Research Unit, 1986.

Periodicals

Goldfarb, Robert S., and John F. Morrall. "The Davis Bacon Act: An Appraisal of Recent Studies." Industrial and Labor Relations Review 34 (1981): 191-206.

Griffaton, Michael C. "Prevailing Wage Laws." Members Only: An Informational Brief Prepared for Members of the Ohio General Assembly by the Legislative Service Commission Staff 122 (1998): 1-15.

Gujarati, D. N. "The Economics of the Davis-Bacon Act."The Journal of Business 40 (1967): 303-316.

Harlin, Kevin. "A Contract for Controversy." Albany Times Union. 10 June 2001.

Keyes, William A. "The Minimum Wage and the Davis-Bacon Act: Employment Effects on Minorities and Youth." Journal of Labor Research 3 (1982): 399-407.

Moreno, Paul. "An Ambivalent Legacy: Black Americans and the Political Economy of the New Deal." Independent Review 6 (2002): 513-531.

Northrul, Herbert R., and Linda E. Alario. "Government-Mandated Project Labor Agreements in Construction, the Institutional Facts and Issues and Key Litigation: Moving Toward Union Monopoly on Federal and State Financed Projects." Government Union Review 19 (2000): 1-159.

Pearce, James E. "The Minimum Wage and the Davis-Bacon Act: A Comment." Journal of Labor Research 3 (1982): 411-413.

Reynolds, Morgan O. "Understanding Political Pricing of Labor Services: The Davis-Bacon Act." Journal of Labor Research 3 (1982): 295-309.

Other

Fulton, Joseph F. The Davis-Bacon Act: History,Administration, Pro and Con Arguments, and Congressional Proposals (Report #78-161E). Washington, DC: Congressional Research Service, 1978.

Hughes, Tim. Michigan State AFL-CIO. "HB 4329 and4383—Attack on Prevailing Wage." Memo to House Employment Relations, Training and Safety Committee. 16 October 2001 [cited 29 September 2002]. <http://www.miaflcio.org/legis/PWTestimony.htm>.

National Center for Policy Analysis. "Davis-Bacon Act Results in Racial Inequities" [cited 29 September 2002]. <http://www.ncpa.org/~ncpa/pd/unions/unionsb.html>.

Philips, Peter. Kansas and Prevailing Wage Legislation.Prepared for the Kansas Senate Labor and Industries Committee, February 20, 1998.

United States Congress, House of Representatives.Committee on Education and Labor. Legislative History of the Davis-Bacon Act. Washington, DC: Author, 1962.

Whittaker, William G. The Davis-Bacon Act Suspension of 1971: The Nixon Administration, Organized Labor, and the Prevailing Wage Statute in Federal and Federally Assisted Construction (Report # 79-249 E). Washington, DC: Congressional Research Service, 1978.

Wial, Howard. Do Lower Prevailing Wages Reduce Public Construction Costs? (Briefing Paper 99/2). Harrisburg, PA: Keystone Research Center, 1999.

—Steven Koczak

St. James Encyclopedia of Labor History Worldwide: Major Events in Labor History and Their Impact