There is a lot of talk these days that the only proposal for which we are likely to see bipartisan support is President Trump’s promise to rebuild the nation’s infrastructure. According to Trump’s website (www.donaldjtrump.com), “Infrastructure investment strengthens our economic platform, makes America more competitive, creates millions of jobs, increases wages for American workers, and reduces the costs of goods and services for American consumers.” What’s not to like? Spending that benefits everyone – new airports, bridges, freeways, clean water, less traffic – plus new jobs and increased wages? Hold on a sec – not so fast. It’s wages where we are going to see a test of Trump’s loyalty: to the American worker who put him in office or to fiscally conservative Republicans who now hold sway in Congress.
In the crosshairs lies the Davis-Bacon Act. Since 1935, the Davis-Bacon Act has required that workers on all federally funded or federally aided construction projects be paid at least the “prevailing wage” in the area where the project is located. The Department of Labor determines the prevailing wages on the basis of the wages and benefits earned by at least 50 percent of the workers in a particular type of job or on the basis of the average wages and benefits paid to workers for that type of job. Ironically, the Act was passed with the specific intent of preventing non-unionized black and immigrant laborers from competing with unionized white workers for scarce jobs during the Depression. The week after Trump took office, U.S. Senator Jeff Flake (R-Ariz.) introduced the Transportation Investment Recalibration to Equality (TIRE) Act, which proposes a repeal of the Davis-Bacon Act and would eliminate the prevailing wage requirement on federal infrastructure and construction projects. And on January 30, 2017, Congressman Steve King (R-Iowa) re-introduced the Davis-Bacon Repeal Act in the House with Senator Mike Lee (R-Utah), who introduced the companion bill in the Senate. According to the Congressional Budget Office, if this policy change is implemented, the federal government would spend less on construction, saving an estimated $13 billion from 2018 through 2026. There would be only nominal administration cost savings – the rest of the savings would come directly from workers’ paychecks.
Those in favor of the repeal argue that, since the 1930s, other policies (including a federal minimum wage) have been put in place that ensure minimum wages for workers employed in federal construction. Additionally, when prevailing wages are higher than the wages that would be paid absent the Act, the construction market is distorted. In that situation, projects are likely to use more capital and less labor than they otherwise would. Additional arguments for repealing the Davis-Bacon Act are that the paperwork associated with the Act effectively discriminates against small firms and that the Act is difficult for the federal government to administer effectively.
One argument against repealing the Davis-Bacon Act is that doing so would lower the earnings of some construction workers. In addition to wages, the Act requires a certain amount per hour be designated as fringe benefits that typically fund medical and retirement plans. If not required, employers would be incentivized to curtail their benefit spending to have more competitive bids. Another argument against such a change is that it might jeopardize the quality of projects. Lower wages might attract workers who are less skilled and do lower-quality work. Also, if one of the objectives of Trump’s infrastructure proposal is to increase earnings for the local population, repealing the Davis-Bacon Act might undermine that aim. The Act prevents out-of-town firms from coming into a locality, using lower-paid workers from other areas of the country to compete with local contractors for federal work, and then leaving the area upon completion of the work.
With Republicans poised to gleefully slash spending the next two years, the repeal will most likely have a lot of support. Were it to end up on the President’s desk, the decision to repeal or leave intact the Davis Bacon Act will be the litmus test that will prove whether President Trump is serious about his promised commitment to the American worker and their wages.
Questions about the Davis-Bacon Act and your federal contract? We’re here to help! Contact Bryan Uecker at (877) 982-8348 or Email Bryan@Benquest.com. Contact Robert Jones at (614) 556-4415 or Email Robert@LeftBrainPro.com.