Background:

The Davis-Bacon Act, in conjunction with related acts specific to various procurement authorities, requires contractors’ payment of administratively determined minimum wage rates, or “prevailing wages,” for construction labor on projects exceeding $2,000 in cost to the federal government.

The Wage and Hour Division of the U.S. Department of Labor administers this program via a statistical wage determination process that purports to compute trade-specific regional market rates for construction labor from voluntary surveys of general contractors. The WHD considers any wage reported paid to 30% or more of the workers within a particular trade to “prevail” for that trade within a geographic unit. Where no uniform rate is reported paid to one-third of the workers within a trade, an average of the reported rates prevails. Because survey respondents who are party to collective bargaining agreements typically report a uniform collectively bargained wage rate, prevailing wage rates effectively standardize payment of union wages across all bidders for covered projects. Further wage inflation arises from methodological failure to segregate urban from rural samples, and from unionized contractors’ overrepresentation among WHD survey respondents. According to a 2011 Government Accountability Office analysis, collectively bargained rates prevailed in 63% of federal determinations despite nonunionized contractors’ composition of the overwhelming majority of the construction workforce.

The DBA imposes onerous reporting, recordkeeping and other compliance obligations, including with complex classification rules that prescribe the tasks performable by covered worker in various trades. Where union wage rates prevail, these classification rules are derived from collective bargaining provisions intended to inflate the labor intensity of the project and are inconsistent with merit shop management practices. Further, these classification rules align with CBAs that are often not available publicly. Because the DBA imposes significant criminal and civil penalties, including for non-wage procedural violations, the DBA exposes merit shop contractors to disproportionate risk.

Independent investigators consistently document significant inflationary effects arising from prevailing wage requirements. For example, researchers at the University of California, Berkeley found prevailing wage requirements increased costs up to 37% on multifamily residential projects funded by federal Low Income Housing Tax Credits between 1996 and 2022, preventing construction of 3,100 housing units per year under mid-range estimates.

Solution:

ABC supports the full repeal of the DBA and related Acts and supports legislative and regulatory reforms to mitigate prevailing wage requirements’ harm to taxpayers and discriminatory effects on the overwhelming majority of the construction industry. ABC urges federal policymakers to replicate successful and continuing prevailing wage reform and repeal efforts on the state level, which have yielded significant taxpayer savings on affordable housing, infrastructure and other critical public projects.