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The federal Davis-Bacon and Related Acts govern wage requirements for contractors and subcontractors performing federally funded or assisted contracts in excess of $2,000. Administered through an unscientific and fundamentally flawed survey process by the U.S. Department of Labor (DOL), these so-called “prevailing” wages hinder economic growth, increase the federal deficit, and impose enormous burdens. Davis-Bacon stifles contractor productivity by raising project costs, and imposes rigid craft work rules that ignore skill differences.

ABC supports full repeal of the Davis-Bacon Act, as well as any state and local prevailing wage laws that mandate wage and benefit rates that do not reflect the current construction market. In the absence of full repeal, ABC also continues to support legislative and regulatory efforts designed to mitigate the Act’s negative effects. ABC opposes expansion of Davis-Bacon into areas of public and private projects in which it has not been previously mandated.

For a summary of studies on the impact of prevailing wage, click here.

 

Davis-Bacon Act/Prevailing Wage

The Davis-Bacon Act is an 85-year-old wage subsidy law administered and enforced by the U.S. Department of Labor (DOL) that mandates so-called “prevailing” wages for work performed on federally-financed construction projects. Davis-Bacon hinders economic growth, increases the federal deficit, imposes enormous burdens that stifle contractor productivity, ignores skill differences for different jobs and imposes rigid craft work rules.

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Illinois Governor Vetoes Bill Tying Prevailing Wage to Union Contracts

On July 22, Illinois Gov. Bruce Rauner vetoed a bill that would have significantly changed the prevailing wage calculation process by tying wage rates to union collective bargaining agreements. In vetoing the bill, Gov. Rauner said Senate Bill 2964 would effectively discount the wage rates of those who have chosen not to join a union and who make up a majority of the construction workforce. 

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West Virginia Enacts Prevailing Wage Repeal and Right to Work

On Feb. 12, the West Virginia legislature voted 18-16 to override Gov. Earl Ray Tomblin’s vetoes of  a prevailing wage repeal bill and the West Virginia Workplace Freedom Act, making West Virginia the 26th Right to Work state in the country and the fourth state to pass Right to Work since 2012. 

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New Hampshire Rejects Prevailing Wage Bill

Last week, the New Hampshire House rejected a bill (House Bill 1641) that would have required prevailing wage be paid on all state construction projects. Citing a union-backed study, proponents of the bill argued the legislation would create jobs, spur economic activity, and raise workers’ wages without increasing the cost of projects. Opponents rejected those assertions and insisted the state would pay more for construction projects under the provisions of the bill. 

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West Virginia Enacts Prevailing Wage Repeal and Right to Work

On Feb. 12, the West Virginia Legislature voted to override Gov. Earl Ray Tomblin’s vetoes of  a prevailing wage repeal bill and the West Virginia Workplace Freedom Act, making West Virginia the 26th Right to Work state in the country and the fourth state to pass Right to Work since 2012. 

Both bills will take effect on July 1, 2016. The actions come nearly a year after West Virginia passed ABC’s government neutrality in contracting legislation, which prohibits government-mandated PLAs and PLA preferences on state and state assisted projects. In signing the Establishing Fair and Open Competition in Governmental Construction Act, Gov. Tomblin became the first Democratic governor to sign legislation outlawing PLA mandates on public construction projects. A total of 22 states have adopted measures ensuring fair and open competition on taxpayer funded construction contracts. 

New Hampshire Rejects Prevailing Wage Bill

Last week, the New Hampshire House rejected a bill (House Bill 1641) that would have required prevailing wage be paid on all state construction projects. Citing a union-backed study, proponents of the bill argued the legislation would create jobs, spur economic activity, and raise workers’ wages without increasing the cost of projects. Opponents rejected those assertions and insisted the state would pay more for construction projects under the provisions of the bill. 

Rep. Jack Flanagan (R-Brookline) claimed the bill would increase construction costs and a fiscal note estimated it would cost the state at least $2.6 million per year to administer the law. In opposing the bill Rep. Flanagan argued that the bill would not “solve the problems it wants to solve” and that New Hampshire “can’t afford to spend more money on these construction projects when we are barely fixing the roads and bridges we have now.” The bill was rejected by a vote of 181-138. New Hampshire repealed its prevailing wage law in 1985.

Wisconsin Reforms Prevailing Wage Laws

During a controversial budget session, Wisconsin significantly reformed its prevailing wage laws with the help of the ABC Wisconsin Chapter which organized a coalition of local chambers of commerce, school districts, small businesses, and municipal utilities to repeal prevailing wage requirements on all Wisconsin public works projects except those built by the state of Wisconsin and state highway projects. 

When this change takes effect on January 1, 2017, it is estimated that between 80-90 percent of public construction projects in Wisconsin will be exempt from prevailing wage. 

In addition, employees that transport mineral aggregate to a project site or transport excavated material or spoil away from a project site will be exempt from prevailing wage laws. Federal “Davis-Bacon” rates will replace any state determination and will be used to set prevailing wage rates on state projects.     

Wisconsin prevailing wage still will not apply to private/local entities that receive tax breaks. Local governments are also prohibited from creating their own prevailing wage laws. The new law also includes some much needed regulatory reforms of third party prevailing wage complaints.  

The $48,000 single trade and $100,000 multi-trade thresholds triggering prevailing wage requirements on state projects was not changed by the reforms.

“Wisconsin’s prevailing wage reform is meaningful, significant and will provide Wisconsin taxpayers with relief for years to come,” ABC Wisconsin President John Mielke said. “Thanks to these reforms, opportunities for small, local businesses like ABC members will open up for them to compete to build public works projects. We commend the state legislature for passing this reform and applaud Governor Walker for signing it into law.”

Although this was a big win, the special interests groups that opposed this pro-taxpayer, pro-small business reform are not accustomed to losing. ABC Wisconsin is going to work over the next 18 months to make sure that the voters of Wisconsin and the public officials know how important it is for this change to become effective and remain in effect.

Federal Compliance Information

Prevailing Wage Resource Book
The Prevailing Wage Resource Book was developed by the U.S. Department of Labor as a training tool for use in prevailing wage conferences.

Field Operations Handbook
The Field Operations Handbook includes the Davis-Bacon Act and Related acts, the Contract Work Hours and Safety Standards Act language.

Kentucky Legislative Research Commission: An Analysis of Kentucky’s Prevailing Wage Laws and Procedures

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 they would more accurately reflect local wages.

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Ohio Legislative Bureau: The Effects of the Exemption of School Construction Projects From Ohio's Prevailing Wage Laws

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 percent. 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.

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University of California, Berkeley: The Effects of Prevailing Wage Requirements on the Cost of Low-Income Housing

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 paper estimates that new prevailing wage requirements signed into law by eventually-recalled Governor Gray Davis in 2001 increased costs on state-subsidized low-income housing in California between 9 percent and 32 percent under the most credible statistical models.

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California Institute for County Government at California State University, Sacramento: An Analysis of Market and Prevailing Wage Rates for the Construction Trades in California

An 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.

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Minnesota Taxpayers Association: Prevailing Wage Rates in Minnesota

A study conducted by the Minnesota Taxpayers Association (MTA) found the state's method for calculating prevailing wage rates on public construction increased project costs between 7 percent and 10 percent. Minnesota and California use a “modal” calculation, in which the rate that is most frequently reported in a survey is designated as the “prevailing” wage.

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Mackinac Center for Public Policy: The Effect of Michigan’s Prevailing Wage Law

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.

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GAO Report: The Federal Government Could Save More Than $4 Billion Over Five Years if the Davis-Bacon Act Were Repealed

In a March 2000 report, the General Accountability Office (GAO) estimates the federal government could save more than $4 billion in discretionary spending outlays over a five year period by repealing the Davis-Bacon Act.

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The Beacon Hill Institute: The Federal Davis-Bacon Act: The Prevailing Mismanagement of Wage

The Beacon Hill Institute (BHI) at Suffolk University in Boston, Mass., found that wages on federally funded construction projects under the Davis-Bacon Act (DBA) are grossly inflated. The February 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. 

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Public Policy Foundation of West Virginia: An Economic Examination of West Virginia’s Prevailing Wage Law

The Public Policy Foundation of West Virginia on Feb. 16, 2009, released a study that concludes 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. 

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Dual GAO Studies Find Negative Impact of Davis-Bacon Prevailing Wage Requirements on Recovery Act Projects

The American Recovery and Reinvestment Act of 2009 (ARRA) expanded federal 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 construction 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. 

Illinois Governor Vetoes Bill Tying Prevailing Wage to Union Contracts

On July 22, Illinois Gov. Bruce Rauner vetoed a bill that would have significantly changed the prevailing wage calculation process by tying wage rates to union collective bargaining agreements. In vetoing the bill, Gov. Rauner said Senate Bill 2964 would effectively discount the wage rates of those who have chosen not to join a union and who make up a majority of the construction workforce. 

Read More

West Virginia Enacts Prevailing Wage Repeal and Right to Work

On Feb. 12, the West Virginia legislature voted 18-16 to override Gov. Earl Ray Tomblin’s vetoes of  a prevailing wage repeal bill and the West Virginia Workplace Freedom Act, making West Virginia the 26th Right to Work state in the country and the fourth state to pass Right to Work since 2012. 

Read More

New Hampshire Rejects Prevailing Wage Bill

Last week, the New Hampshire House rejected a bill (House Bill 1641) that would have required prevailing wage be paid on all state construction projects. Citing a union-backed study, proponents of the bill argued the legislation would create jobs, spur economic activity, and raise workers’ wages without increasing the cost of projects. Opponents rejected those assertions and insisted the state would pay more for construction projects under the provisions of the bill. 

Read More

Prevailing Wage’s Impact on Affordable Housing

The New York Independent Budget Office (IBO) has released a revised report on the impact prevailing wage requirements would have on affordable housing projects built with the 421a property tax break. The 421a tax credit had been the subject of extensive negotiations in the past months. In Jan. 2016, the parties involved announced they could not reach a compromise, killing the tax credit and jeopardizing Mayor de Blasio’s plans for 80,000 affordable housing units for New York City residents. The agency had initially estimated that prevailing wage requirements would add $2.8 billion to the initiative’s total, but the agency says that figure was low as a result of data errors. After receiving additional information from the Department of Housing Preservation and Development, IBO now estimates prevailing wage requirements would cost the city an additional $4.2 billion, increasing affordable housing construction costs by 23 percent or $80,000 per unit

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West Virginia Legislature Advances Prevailing Wage Repeal, Right to Work

On Feb. 4, the West Virginia Legislature sent two important bills to the governor’s desk. The House of Delegates passed ABC-supported right-to work legislation, the “Workplace Freedom Act” (SB 1) by a vote of 54-46, while the state Senate approved legislation repealing the state’s prevailing wage law along party lines. The measures were intensely debated in both chambers in the weeks leading up to the votes. West Virginia’s prevailing wage law was mired in controversy following the passage of a reform bill in 2015 and ABC’s West Virginia Chapter has been a vocal supporter of repealing the state’s prevailing wage.

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New West Virginia State Sen. Puts Right-to-Work, Prevailing Wage Repeal in Motion

West Virginia State Senator Sue Cline (R-Wyoming) was sworn into office on Jan. 25 following a Jan. 22 court decision requiring Gov. Earl Ray Tomblin (D- W.Va.) to appoint a Republican to fill a vacant seat. Sen. Cline was appointed to fill a vacancy created by the resignation of Sen. Daniel Hall (R-Wyoming), who was elected as a Democrat but switched parties prior to resigning.

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Study Finds Flaws in Wisconsin's Prevailing Wage Methods

In a study evaluating Wisconsin’s approach to calculating prevailing wages and its financial impact on taxpayers, the nonpartisan, nonprofit, and independent Wisconsin Taxpayers Alliance (WISTAX) found at least two methodological “flaws” that tend to raise prevailing wages above market rates.

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Nevada Gov. Brian Sandoval Signs Prevailing Wage Exemption Bill

Nevada Gov. Brian Sandoval (R) March 6 signed S.B. 119, which will exempt K-12 and higher education school construction from state prevailing wage requirements beginning immediately.

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States Push Forward with Prevailing Wage Reform

Lawmakers in a number of states have made reforming outdated prevailing wage laws a major priority so far in 2015. In the past month, legislators in West Virginia, Nevada and Indiana have advanced legislation that attempts to narrow the types of construction projects affected by prevailing wage, and in some cases, to remove the law entirely. 

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Illinois Gov. Bruce Rauner Calls for PLA and Prevailing Wage Reforms

During his first State of the State address on Feb. 2, Illinois Gov. Bruce Rauner (R) called for reforms related to project labor agreements (PLAs) and prevailing wage requirements that will help empower Illinois residents and drive economic growth.

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