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. 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 the WHD’s inaccurate measurement of wages has several principal consequences for construction wages and costs:

  • The WHD methods inflate wages by an average of 22 percent
  • The WHD methods inflate construction costs on projects subject to the DBA by 9.91 percent
  • The WHD methods unnecessarily raise construction costs by a total $8.6 billion per year on projects subject to the DBA
  • 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

Read the report: The Federal Davis-Bacon Act: The Prevailing Mismanagement of Wage