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Archived News Release--Caution:
information may be out of date.
For more information call: (202) 219-8743.
Assistant Secretary of Labor for Employment Standards,
Bernard E. Anderson, testified on Capitol Hill against the repeal of the
Davis-Bacon Act.
Anderson testified Wednesday before the Labor and Human
Resources Committee on the damaging effect that repealing the Davis-Bacon Act
would have on wage levels in the construction industry, on the hiring and
training of minority workers, on the final costs of projects to the U.S.
taxpayer and on the ability of local contractors to compete fairly for U.S.
government construction projects.
Repealing the Davis-Bacon Act would hurt working people, as
well as construction contractors and, potentially, the American taxpayer,
Anderson said.
"More than half a million construction workers would be big
losers if the Act is repealed because they will suffer reduced earnings and a
lower standard of living. Despite popular misconceptions, these workers
generally have modest earnings and need the act's protections. . . . Data for
1994 show that construction workers' average annual earnings were under
$30,000."
Anderson said that labor costs are a significant component
(usually about one-third) of project costs, and without Davis-Bacon Act
protections, contractors would be under intense competitive pressure to lower
wages to compete successfully for federal contracts. Additionally, without the
prevailing wage requirement in the act, contractors could undercut the local
labor market by bringing in workers from outside who would be paid less than
locally prevailing wages.
The construction industry as a whole benefits from
Davis-Bacon as well, said Anderson. With wages removed as a significant factor
in bidding, contractors are forced to compete on productivity and management
efficiency as the basis for obtaining construction contracts.
In addition, by paying prevailing wages, contractors may
attract and keep skilled workers in the industry, especially since the
instability and seasonality of construction work can act as a disincentive for
workers to enter the field.
The act also allows contractors to pay employees in
registered apprenticeship and training programs less than the prevailing wage
otherwise required for the job, creating a financial incentive for contractors
to fund and support apprenticeship programs which in turn can offer minorities
and women greater access to construction jobs.
The Administration believes the disadvantages of repealing
the Davis-Bacon Act far outweigh any potential advantages. While some contend
that government may save initial contract costs, it is entirely possible the
savings would not be passed on to the government.
The Davis-Bacon Act, enacted in 1931, requires contractors
on federally funded construction projects to pay workers no less than the wage
rates that prevail in the local area on the same type of construction. The act
does not require a contractor to employ local workers, but it does require the
workers be paid in accordance with local labor standards.
It is estimated that there are more than 500,000
construction workers in the United States who receive prevailing wages through
the Davis-Bacon Act.
Because the federal government must put primary emphasis
in awarding contracts on the lowest bid, market forces will push contractors to
lower wages in order to try to make the lowest bid, driving wages down.
- which in constant 1982 dollars, have been on a downward trend since
1972
- by at least 5 percent.
For construction workers, who have annual average earnings
of $27,500, this could result in a loss of nearly $1,400 in annual income.
The intent of the Davis-Bacon Act is to protect workers and
employers by giving local labor and local contractors a fair opportunity to
obtain federal construction projects.
Davis-Bacon benefits minority workers by seeking to ensure
that all employees, regardless of race, will be paid at least the locally
prevailing wage. According to former Secretary of Labor Ray Marshall, the
"workers most often victimized by unscrupulous contractors are minority
workers... Davis Bacon is an integral part of ensuring a decent life for the
hardworking men and women in the construction industry."
Davis-Bacon also lessens the exploitation of unskilled and
semi-skilled labor, of which 35 percent are women and minorities, by ensuring
that if these workers are paid less than the prevailing wage, they must be
enrolled in apprenticeship or training programs that will help them develop
their skills and increase their marketability. According to former Secretary of
Labor John T. Dunlop, "formal training programs are essential to recruit and
train minorities for the construction industry." If Davis-Bacon were repealed,
contractors would have less incentive to enroll workers in training programs.
The enactment of 60 related statutes since the passage of
the Davis-Bacon Act provides strong evidence that Congresses and Presidents of
both parties believed the Davis-Bacon Act provided beneficial and
nondiscriminatory protections.
Available data simply refute the argument that Davis-Bacon
operates in a manner that discriminates against minorities and women. In fact,
there is no difference in the employment of minorities and women by federal
construction contractors and contractors which do not do federal work.
Davis-Bacon is endorsed by the NAACP.
One intent of the Davis-Bacon Act was to ensure that local
contractors have a chance to obtain Federal construction work. If Davis-Bacon
did not exist, many local contractors would not be able to compete with outside
contractors which use less costly labor from outside local communities and
thereby underbid them.
In Congressional hearings on the Davis-Bacon Act,
contractors have expressed support for Davis-Bacon. They say that Davis-Bacon
leads to high productivity. For example, one contractor stated:
"I found that the Davis-Bacon Act, by eliminating wages as
a competitive factor, creates a level playing field on which to compete for
government contracts that provides an opportunity for companies like mine to
compete with large and small contractors on the basis of our management ability
and high productivity."
Lowering wages does not necessarily lead to lower
costs.
Equating wage reductions with dollar-for-dollar savings is
inaccurate because it fails to take into account other factors that may affect
cost such as the relationship between productivity and wages. This is a crude
methodology at best. The Congressional Budget Office states that, "[h]igher
wage rates do not necessarily increase costs ... [I]f these differences in
wages were offset by hiring more skilled and productive workers, no additional
construction costs would result."
Davis-Bacon wage determinations apply in over 3,000 U.S.
counties, and to four types of construction (building, heavy, highway, and
residential). Of the 12,500 prevailing wage schedules issued by the Department
of Labor, only 29 percent require federal contractors to pay collectively
bargained rates across the board. Forty-eight (48 percent) percent of the wage
schedules establish minimum rates that are all non-union; and mixed (union and
non- union) rates make up the remaining 23 percent.
The perception that the Davis-Bacon rate is "usually the
union rate" is a carry-over from the days, more than a decade ago, when the
prevailing rate was set based on the rate paid to 30 percent of the workers in
a classification. Since 1983, union rates are found prevailing only when the
rate is paid to 50 percent of the workers in a particular classification.
Archived News Release--Caution:
information may be out of date.
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