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News Release

Archived News Release — Caution: Information may be out of date.

U.S. DEPARTMENT OF LABOR

EMPLOYMENT STANDARDS ADMINISTRATION

LABOR DEPARTMENT OFFICIAL TESTIFIES BEFORE SENATE COMMITTEE; ADMINISTRATION OPPOSES REPEAL OF DAVIS-BACON ACTFri., Feb. 17, 1995

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"More than half a million construction workers would be big losers if the Act is repealed because they will suffer reduced earnings and a lower standard of living.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.

DAVIS-BACON FACT SHEET

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.

THE PROBLEM: REPEALING DAVIS-BACON WILL RESULT IN LOWER WAGES FOR HALF A MILLION AMERICANS

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.

A study by the University of Utah indicates that repeal of the Davis-Bacon Act could lower the wages of construction workers

  • 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.

DAVIS-BACON BENEFITS MINORITIES

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.

THE DAVIS-BACON ACT BENEFITS CONTRACTORS

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."

THE DAVIS BACON ACT DOES NOT AUTOMATICALLY INCREASE THE COST OF CONSTRUCTION TO THE FEDERAL GOVERNMENT.

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 DOES NOT REQUIRE PAYMENT OF UNION WAGE RATES

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.

Agency
Employment Standards Administration
Date
February 17, 1995
Release Number
esa-19950217
Contact: David Roberts
Phone Number