The ABC Government Affairs Department maintains a virtual library of Davis-Bacon studies. We are constantly on the lookout for any studies that may be of use to our membership in the battle to preserve open competition. For more information, or to tell us about a prevailing wage or Davis-Bacon study not provided here, please email ABC at gainfo@abc.org.
An April 6, 2011 report published by the Government Accountability Office (GAO), titled, "Davis-Bacon Act: Methodological Changes Needed to Improve Wage Survey," highlighted serious flaws in how wages are determined under the Davis-Bacon Act, and recommended steps for the Department of Labor (DOL) to take in order to remedy some of the issues. GAO examined how DOL has addressed previous concerns from stakeholders, and also looked at new issues that need to be resolved.
In the report, GAO acknowledged some actions by DOL to correct problems with the process and with the wage survey process itself, but criticized the agency's inability to fix major problems related to accuracy, overall quality and timeliness – pointing out that DOL is still years behind schedule on many of its surveys, forcing federal contractors to rely on out-of-date information.
GAO also noted ongoing issues with the representativeness of the wage determination survey results, reporting that about 25 percent of final wage rates for job classifications are based on wages reported for six or fewer workers. In addition, 63 percent of all DOL wage determinations consider wages set by union agreements to be “prevailing,” even though only 13 percent of construction workers are covered by such an agreement.
According to the report, DOL acknowledged that nonunion contractors are more likely not to respond to wage surveys because it can be more difficult for them to compile the information and because of a generally more cautious attitude toward wage reporting.
The report showed that a lack of transparency in the process and no incentive to participate was partially to blame for the low response rates and noted that less participation often results in wage determinations that are inaccurate. DOL also admitted nonresponse is likely to cause a bias in the surveys; however the agency said it has no idea whether its wage determinations accurately reflect prevailing wages because it does not calculate response rates or analyze survey nonrespondents.
In light of the major flaws the report uncovered, GAO recommended DOL obtain expert and objective advice on its survey design and methodology and examine the possibility of using statistical sampling instead of a census survey. DOL agreed that there are problems with the surveys, but told GAO it would prefer to rely on staff experience to implement those changes.
The GAO report was released in advance of an April 14, 2011, U.S. House Committee on Education and the Workforce Subcommittee on Workforce Protections hearing titled, “
Examining the Department of Labor's Implementation of the Davis-Bacon Act.” ABC member Thomas Mistick, principal of Church Restoration Group, Cranberry Township, Pa., educated the subcommittee on how the Davis-Bacon Act negatively impacts his construction business. Mr. Mistick
testified that DOL has failed at administering the Davis-Bacon Act and that the law is “fatally flawed,” echoing the findings of GAO's April 6 report.
The
American Recovery and Reinvestment Act of 2009 (ARRA) expanded Davis-Bacon requirements to 40 additional federal programs, according to a Feb. 2010 study conducted by the Government Accountability Office (GAO). Although the impacts of these requirements vary among agencies (primarily because many are not directly involved in constuction activities), several--including the U.S. Department of Energy (DOE)*--report that Davis-Bacon has had a negative impact on ARRA-related program administration and goals.
Earlier this year, a similar GAO study found that Davis-Bacon provisions were the primary factor for excessive administrative burden of, and the ultimate failure to meet multi-agency goals pertaining to, the
Weatherization Assistance Program.
Four federal agencies reported that Davis-Bacon directly delayed their ability to spend funds. In addition, the U.S. Department of Labor (DOL) was required to determine prevailing wages for weatherization work in every county in the United States. By year's end, 2009, only 9,100 of the planned 593,000 homes in the program had been weatherized.Both GAO studies (and their respective summaries) can be found below.
*A separate,
internal study by DOE's Inspector General cited Davis-Bacon provisions as the prime factor for holding up the launch of its weatherization program, which did not begin work until October 2009--eight months after President Obama signed ARRA into law.
The
Public Policy Foundation of West Virginia on Feb. 16, 2009 released a study which concludes that West Virginia's average state prevailing wage rate is at least 49 percent, and as high as 74 percent (using adjusted figures), above West Virginia's true market prevailing wage in the construction industry. The study also found that as many as 1,500 more jobs could be created if West Virginia's prevailing wage law were repealed or reformed to reflect actual market wages.
“An Economic Examination of West Virginia’s Prevailing Wage Law” recommends full repeal of the
West Virginia prevailing wage law. Short of repeal, the study makes four recommendations to improve state prevailing wage requirements: (1) change the method of establishing prevailing wage rates so that they better reflect true prevailing local market rates; (2) mandate that new methodology by law; (3) create exemptions to the prevailing wage for small contracts; and (4) create exemptions to the prevailing wage for schools.
- Click here to view the study
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Citizens Housing and Planning Council of New York City December 2008 study finds “that imposing prevailing wage requirements on the affordable housing industry reduces the amount and affordability of subsidized housing while doing little to improve the real problems faced by workers in the construction industry in general.” The study concludes, “Applying prevailing wages to affordable housing construction will increase its costs, reduce affordability, and not address construction issues of site safety, quality of construction, and job accessibility. Affordable housing developers, wherever possible, should be able to pay wages that actually prevail in the marketplace.”
The study also addresses the difficulties minority-owned face in complying with prevailing wage requirements. The study finds that “there is also anecdotal evidence that the imposition of prevailing wage requirements would significantly hinder minority-owned contracting and subcontracting firms, some of which find compliance with the prevailing wage rules difficult or impossible. Few such firms have the back-office capacity to comply with the complex reporting and oversight requirements of prevailing wages. While it is reasonable to hope that such capacity could be developed…most minority firms fear that their businesses will go under if such a requirement were put into place.”
The Federal Davis-Bacon Act: The Prevailing Mismanagement of Wages (Feb 08)
The Beacon Hill Institute at Suffolk University in Boston, Mass., found that wages on federally funded construction projects under the Davis-Bacon Act are grossly inflated. The Feb. 2008 study compared the methods used by the U.S. Department of Labor’s (DOL) Bureau of Labor Statistics (BLS) and the DOL’s Employment Standards Administration’s Wage and Hour Division (WHD) to determine the prevailing wage for workers employed on federally funded construction projects. Researchers examined nine occupational categories in 80 metropolitan areas and concluded that the current WHD method unnecessarily inflates wages by a weighted average of 22 percent when compared to wages determined by BLS methodology. Some of the problems found in the calculation of the prevailing wages under WHD included untimely wage reporting, poor survey design and the opportunity for unions to dominate the process.
The BHI study found that the WHD mismeasure of wages has five principal consequences for construction wages and costs:
- The WHD methods inflate wages, on average, by 22%
- The WHD methods inflate construction costs on projects subject to the DBA by 9.91%
- The WHD methods unnecessarily raise construction costs by a total $8.6 billion per year on projects subject to the DBA
- In some areas of the country, the DBA fails to protect worker wages. The study found that the government set wage is well below the BLS and/or market wage because WHD methodology is exceptionally flawed and untimely
- States that opt to use the DBA prevailing wage, the DBA methodology or the local union wages are likely to experience higher public construction costs
Semiannual Report to the Congress: Office of Inspector General U.S. Department of LaborA report from the U.S. Department of Labor's Office of the Inspector General (OIG) covering October 1, 2003 to March 31, 2004, questions the credibility of wage determinations under the Federal Davis-Bacon Act provided by the Employment Standards Administration's Wage and Hour Division. OIG conducted an audit and discovered errors in almost 100 percent of the reviewed wage reports. The OIG report called for a "representative and unbiased" wage survey process that is statistically viable. A continuing concern is the extensive delay between completing surveys and publishing surveys.
The agency recommended that DOL's Wage and Hour division base the wage rates on a system similar to that of the Bureau of Labor Statistics, which OIG says uses statistically valid methodology for conducting national wage surveys. The DOL previously rejected this recommendation due to cost and opted instead to re-work their current approach. From FY 1997 to 2003 the DOL spent $22 million for Davis-Bacon wage determination improvements that OIG now says has resulted in few improvements. OIG says that the roadblocks to using BLS data are not insurmountable and should be revisited.
Budget Issues: Budgetary Implications of Selected GAO Work for Fiscal Year 2000The Congressional Budget Office estimates savings solely from reducing the regulatory and paperwork burden if the Davis-Bacon Act were repealed to be more than $4 billion in discretionary spending outlays over a five year period, reports the General Accounting Office in a March 2000 report. “Without making any assumptions about the accuracy of prevailing wage rates, but considering other factors such as recordkeeping duties required under the act, CBO concluded that Davis-Bacon inflates construction costs,” reports GAO in Budgetary Implications of Selected GAO Work for Fiscal Year 2001. The savings are detailed in Appendix III at pages 277-278.
Thieblot Study on State Prevailing Wage Laws 1995This publication provides in-depth analysis on state prevailing wage laws. You will find which states have prevailing wage laws and which states have repealed them. The assessment bases for states with prevailing wage laws and finally an examination of reform possibilities.
Michigan Prevailing Wage Costs Taxpayers $250 Million Annually, Reduces Construction Jobs, Primarily Benefits High-Wage Construction Workers (2007)A study by the Mackinac Center for Public Policy estimates that Michigan's prevailing wage law, which requires union wages to be paid on state construction projects, costs state taxpayers about $250 million per year. The main effect of this extra cost is to boost the wages of construction workers, most of whom earn compensation well above the average for Michigan residents, according to the study. Michigan's prevailing wage law also appears to decrease the number of construction jobs in the state.
The study also found that because state guarantees on school district construction bonds trigger prevailing wage requirements, the prevailing wage law also applies to most public school construction. Exempting public school districts alone from the law's requirements would likely save state taxpayers around $125 million annually.
Study Finds Minnesota's Prevailing Wage Calculation Methods Further Increase Cost of Public Construction (2005)A new study conducted by the Minnesota Taxpayers Association (MTA) found that the state's method for calculating prevailing wage rates on public construction increased project costs between 7 and 10 percent. Currently, the state of Minnesota, as well as the state of California, use a “modal” calculation, where the rate that is most frequently reported in a survey is designated as the “prevailing” wage.
According to the study, Minnesota's modal method of calculating the prevailing wage rate increases the likelihood that large-scale, collectively bargained wage rates become the prevailing wage, because these rates tend to be uniform within a specific job class. The study found that in 26 of the 32 counties where state building projects were located, federal prevailing wage rates were set entirely from union rates.
MTA examined 34 school district construction projects, 57 state building projects and 247 state transportation projects, with total project costs of more than $1.7 billion, concluding that “Minnesota would have experienced estimated savings of $126 million to $171 million...of total project costs in 2002 if the state had substituted...median wage rates for current state prevailing wage rates.”
California Study Reveals Wide Disparities Between Market Wages and Prevailing Wage RatesAn August 2003 study from the California Institute for County Government at California State University, Sacramento shows that federal commercial prevailing wage rates and state prevailing wage rates in California are on average 36 percent to 55 percent higher than market wages.
The study, An Analysis of Market and Prevailing Wage Rates for the Construction Trades in California, compares market wages to commercial and residential Davis-Bacon federal prevailing wage rates and state prevailing wage rates on a county-by-county basis for five trades: electricians, carpenters, drywall installers, HVAC/sheet metal workers, and plumbers. Maps included with the study show that as a general rule the disparity between government-imposed rates and market wages increases as the distance increases between a county and the California Department of Industrial Relations headquarters in San Francisco. The California Institute for County Government is a nonpartisan public policy institute that is a joint program of the California State Association of Counties, the California State University system, and California State University at Sacramento.
(
Updated 2004 version of the above study)
The Effects of Prevailing Wage Requirements on the Cost of Low-Income Housing (2003)A working paper released in September 2003 by the Program on Housing and Urban Policy at the University of California, Berkeley presents new evidence on the increased costs of prevailing wage laws on construction. "The Effects of Prevailing Wage Requirements on the Cost of Low-Income Housing" estimates that new prevailing wage requirements signed into law by now-recalled Governor Gray Davis in 2001 increased costs on state-subsidized low-income housing in California between 9 and 32 percent under the most credible statistical models. According to the paper, under reasonable conditions, the authors' mid-range estimate of the prospective decrease in dwellings in California subsidized by tax credits alone exceeds $2,600 per year.
The U.C. Berkeley study conclusions are consistent with a June 2004 study from the California Institute for County Government at California State University, Sacramento showing that the expansion of prevailing wage coverage in California to affordable housing increased the cost of that housing by an average of 11 percent. See
Impact of Prevailing Wage Rate Requirements on The Costs of Affordable Housing In California.
The Effects of the Exemption of School Construction Projects from Ohio's Prevailing Wage Laws (2002)The Legislative Bureau of the Ohio Legislature determined that rescinding prevailing wage requirements for school construction saved $487.9 million in aggregate school construction during the post-examination period, an overall savings of 10.7%. This study provides background information and evaluates the amount of money saved by school districts and education service centers due to the exemption, the impact of the exemption on the quality of school building construction, the impact of the exemption on the ways of construction of public school buildings, and summarizes the findings and discusses the limitations. This publication is a report of the research staff of the Legislative Service Commission, published May 20, 2002.
Click here for more information (and studies) on Davis-Bacon and School Construction.
Kentucky Prevailing Wage Study (2001)In May of 2001 the Program Review and Investigations Committee authorized a study of Kentucky's prevailing wage law. The committee staff suggested changes to the prevailing wage laws so that they would more accurately reflect local wages.
* Some of these documents may take a moment to download.
ABC chairs the Coalition to Repeal the Davis-Bacon Act which works to educate Members of Conress about the detrimental impact of this law on workers, taxpayers and the economy. If you are interested in receiving more information about the Coalition, or you wish to join, please contact us at
gainfo@abc.org.