The moderate wing of the liberal blogosphere is abuzz over President's Bush's suspension of the Davis-Bacon Act in the Katrina zone. In essence, Davis-Bacon requires federally subsidized construction contractors to pay union wages and follow union work rules. Some moderate Democrats, now represented by Mickey Kaus in the blogosphere, have opposed Davis-Bacon for years because it raises the costs of government construction while favoring established contractors and skilled union workers over their less-established competitors. Other Democrats, however, ably represented by Matt Yglesias, argue that Davis-Bacon helps unions, and unions help the Democrats and liberal causes more generally, so Davis-Bacon is a good thing, even if it's a wasteful law.
I've written a fair amount about Davis-Bacon, and especially its blatantly racist origins. My first paper on the subject, published by the Cato Institute way back in 1993, can be found here. More comprehensive research resulted in chapter 3 of my book, Only One Place of Redress: African Americans, Labor Regulations and the Courts from Reconstruction to the New Deal, which I've temporarily put online here. I doubt any objective observer could read this chapter and believe labor union denials (expressed in a paper, apparently not available online, entitled "The Davis-Bacon Act: A Response to the CATO Institute’s Attack," by the AFL-CIO, Building and Construction Trades Department), that Davis-Bacon was motivated in significant part by the desire to exclude African Americans from federal construction jobs.
Last week, someone from the New York Times asked me to write a short piece arguing that Davis-Bacon should be repealed. The Times ultimately declined to run the piece, but I reprint it, in a slightly longer version below.
Davis-Bacon: Racist Pork
By David E. Bernstein
President Bush stands accused of insensitivity toward minorities and the poor because he has temporarily suspended the Davis-Bacon Act--which requires contractors working on federally subsidized projects to pay “prevailing wages”--in areas affected by Hurricane Katrina. The president’s critics, however, ignore both the discriminatory history and current perverse effects of Davis-Bacon. In fact, the president’s order does not go nearly far enough.
In 1927, Rep. Robert Bacon (R-NY) --whose pet issue was protecting America’s racial "homogeneity"--introduced what became the Davis-Bacon Act in 1927 after a contractor employed African-American workers from Alabama to build a Veteran’s Bureau hospital in his district. The "neighboring community," Bacon reported, was "very upset," as were local unions.
Bacon's bill was later co-sponsored by a fellow avowed racist, Sen. James Davis (R. Pa.), who sympathized with Bacon's complaints about the "outfit of negro laborers" who worked on the hospital. Davis-Bacon's legislative history is punctuated by repeated complaints from various congressmen about African-American construction workers stealing jobs from "white labor."
Congress ultimately chose to pursue the goal of excluding blacks for the benefit of unionized white workers by requiring federal contractors to follow union wage and work rules.
As expected, by forcing federal contractors to pay their workers the "prevailing wage" as determined by local union wage rates, Davis-Bacon prevented African Americans--who have long suffered discrimination from the building trades unions--and other workers from competingwith with union workers for jobs on federally funded projects. Contractors found that the most efficient way to hire skilled, union-wage workers was through the union hiring hall.
Enforcement of union work rules compounds Davis-Bacon's discriminatory effects by favoring skilled workers over (disproportionately minority) unskilled workers. Rigid job classifications prevent laborers from gaining skills on the job, unless they manage to find a place in a union apprenticeship program.
Minority contractors, meanwhile, find that Davis-Bacon's pro-union bias, opaque regulations, and expensive compliance costs create a tilted playing field, favoring established, white-owned union construction companies.
For 74 years, Davis-Bacon has fulfilled its purpose of reducing minority participation in the construction industry.
Ironically, Davis-Bacon no longer even serves its original function of ensuring that public works jobs go to local workers. Residents of urban areas today often find themselves looking on with understandable resentment as government contractors import union workers from distant suburbs and beyond rather than hire local minority workers who lack the skills, experience and connections to command union wages.
Beyond Davis-Bacon's discriminatory effects, the law adds billions of dollars to the cost of infrastructure projects. Apologists claim that the law results in higher quality construction and reduces workplace injuries. However, this claim is based on the unsupported assertion that union workplaces are inherently safer than non-union workplaces.
Besides, grading and rewarding federal contractors based on their actual performance would be a far more efficient way to achieve those goals.
In short, Davis-Bacon is wasteful political pork with dubious racist origins. Even today, the legislation benefits the building trade unions at the expense of unskilled workers. President Bush should be applauded for suspending it in areas impacted by Hurricane Katrina, and Congress should completely repeal it.
Hurricanes Katrina and Rita are having massive effects on the national economy, driving up construction and fuel costs all across America, not just the four states most affected by the Hurricane. They're having far more of a national impact than Hurrican Andrew, which prompted the elder Bush (George H.W. Bush) to suspend Davis-Bacon in 1992.
Section 6 of the Davis-Bacon Act doesn't limit the geographic scope of any suspension. It authorizes the President to suspend Davis-Bacon nationwide in response to what he finds to be a "national emergency." Bush should respond to the present national emergency by suspending Davis-Bacon nationwide.
Suspending Davis-Bacon nationwide would save billions in reconstruction costs and create many thousands of jobs.
Here in Mississippi, the word I hear is that it's getting really hard to find guys to do construction, etc., because they are all flocking to the Coast.
High demand for labor. Hence, higher prices?
So what's the point of allowing firms to pay workers less, at a time when workers are going to be in short supply and getting paid more?
The paper shows that blacks suffered from discrimination in the construction industry. But we know that. To make your point you would have to demonstrate that blacks suffered more discrimination in the construction industry then in other industries that do not have laws similiar to Davis-Bacon.
Since your paper does not even attempt to do that it does
not come anywhere making your point that discrimination in the construction industry is due to Davis-Bacon.
I see the practical benefits, but it seems like an awfully unprincipled argument...
Not sure I follow this. My non-union contractor client can comply with D-B by bidding for the work with labor factored into the bid at the published D-B rate. Unless the bid gets so high that he lacks bonding capacity, the cost of the prevailing wage is passed through to the owner. Since profit and overhead are normally computed and billed as a percentage of the underlying costs, the contract at D-B rates is more profitable for the contractor, and the labor force loves the extra money.
There is arguably more risk, since the contractor needs to "front" the labor costs (at the higher rates) until paid by the project owner. Payroll management is not significantly more difficult for a D-B project as opposed to a "pay what you want" project.
Nothing racist is involved now, though things might have been different in 1927. If anything, at least in CA, where work forces are heavily non-white, it would be racist in effect to waive D-B, and make workers work for less than union wages.
If the owner wants to be as cheap as possible, and is happy to see skilled labor paid at the lowest rates that will raise sufficient forces, then D-B waiver makes sense. But if one wants to see skilled labor do well, and contractors do well, and does not mind paying a bit more, then keeping D-B in place makes sense.
Looks penny wise and pound foolish to waive D-B in the Gulf scenario, if one wants that area to become more prosperous. Also, note that if the demand for labor goes higher in that area, even if D-B is waived, the contractors may still need to bid as if D-B applied, so they will have the funds needed to compete for (or import from other areas) the required labor.
Generally, I am not seeing the sort of emergency "fast-track" projects that requrie blanket waiver of D-B.
Some projects might be "fast track" (such as rebuilding bridges) but beyond that, what exactly are the "rush" projects that Bush is concerned about? Schools? Hospitals? Levees?
I suspect Rove et al simply wanted to jab the Democrats (keep money out of union hands, and out of Blue political hands) and had no other deeper rationale.
And it was passed for explicitly racist reasons, as its legislative history clearly shows it was (it was proposed as a direct response to a building of a veterans' hospital using black non-union labor, by a representative who sought to preserve the racial "status quo"). That is enough to invalidate it. See Hunter v. Underwood (Rehnquist, J.)(holding that although the Constitution expressly permits felons to be denied the right to vote, and felon-disenfranchisement statutes serve valid ends, Alabama's felon-disenfranchisement law was nevertheless invalid, since it was motivated by racism, unlike many other felon-disenfranchisement laws, which predate the civil war and thus were not racially motivated).
Moreover, Davis-Bacon still has, in addition to the requisite racially-discriminatory purpose, a racially disparate impact on minority employment and minority contractors. The National Association of Minority Contractors has opposed the law due to its damaging effect on minority contracting opportunities.
Prior to Davis-Bacon's passage, the unemployment rate among black construction workers was similar to that of whites. Today, it's higher.
Davis-Bacon will costs billions of dollars and thousands of jobs unless it is suspended nationwide, as Section 6 of the Act permits in a "national emergency."
1. Why should we assume that Davis-Bacon continues to work to the detriment of African Americans? Any data to support that? I would assume that in modern-day America it primarily discriminates against illegal/undocumented laborers. (I just had a lot of work done on my house; it is nearly impossible to find a contractor where I live who does not make use of the massive illegal workforce.)
2. If part of the reason for passage of legislation (or even the sole reason) is unsavory, but the legislation no longer has its intended effect, does that render it offensive today? Does it mandate its repeal? What if the legislation, as it operates today, performs quite a different, legitimate, function? Is it somehow so tainted by its racist origins that we are duty-bound to repeal it?
Davis-Bacon should be looked at as it operates today. I really don't care why it was passed. Is it effective today? Does it hinder relief efforts such that it should be suspended in the Gulf region? Does it hinder commerce in general such that it should be repealed nationwide? Does it protect American workers against the wage-depressing effects of illegal alien workers? These are all relevant questions that should inform policy. Did some Senators urge the passage of Davis-Bacon to protect white jobs against African-American competition two generations ago? An interesting historical question, but totally irrelevent to policy analysis today.
Maybe a non-unionized mbe would like a waiver, but not for any reason that I can see other than to keep union shops from being able to bid.
Waiving D-B precludes potential bids from union shops. It does not preclude a non-union shop from bidding, and paying prevailing wages for that job. This is so whether it is an mbe or not.
"Moreover, Davis-Bacon still has, in addition to the requisite racially-discriminatory purpose, a racially disparate impact on minority employment and minority contractors."
Not sure this is the case. Are there statistics? If D-B means more union shops get work, or union shops get more work, and unions are discriminating, is it D-B that has the bad impact or is it the underlying union discrimination? Seems to me, it is the latter.
"The National Association of Minority Contractors has opposed the law due to its damaging effect on minority contracting opportunities."
I suppose any non-union contractor would like to avoid competition by union contractors, which could happen from waiver of D-B. But I am not seeing waiver of D-B as likely to increase employment of minorities in the Gulf area, unless the union forces avaialble are far more white than the non-union forces available.
If the unions have a problem (meaning they discriminate racially in giving out union cards), then they should be taken to task directly about the way they hand out union cards. Waiving D-B sounds like throwing out the baby with the bath water, if the rationale for waiver is to make unions bring in more minorities.
I have not seen any NAMC pronouncement about opposing waiver of D-B in the Gulf area, or any projection of how that would lead to increased employment of minorities in the Gulf.
Yglesias believes in the fundamental value of unions (although I tend to agree that they cause problems, I am unwilling to contend that they have no benefits whatsoever), and as such feels that injuring them by repealing the act is a bad thing. However, his support for them is not tied to the contention that they "help the Democrats" except insofar as Democrats support more "progressive" causes than the Republican party. Without getting into a fight over what counts as progressive, I think the I like progressive causes, unions help progressive causes, therefore I like unions chain is pretty inoffensive.
Additionally, whether or not Davis-Bacon is essentially wasteful depends, like the question of free trade, entirely on your perspective about who reaps the benefits of the salvaged waste. Needless to say, producing goods in China may be net beneficial to the world, but is of little consolation to the US workers losing their jobs. I say this not to refight the free trade battle, but to point out that the question of who benefits and who is harmed is an eminently reasonable question to ask. Yglesias is making a much more complex argument than you give him credit for, and it's hardly as clear cut as you say.
Some employees got regular government assignments and some rarely or never got them. Why? Because the "prevailing wage" jobs were doled out like a slush fund to reward the assignment manager's buddies.
A tax-payer funded slush fund, of course. It did wonders for morale.
The 20th century also saw a rise in political capital, companies structuring themselves not to provide goods and services in a competitive marketplace, but to compete for government contracts or contracts in regulated industries.
Think Halliburton, Enron, that scene in Schindler's List with the fruit baskets. These arrangments are bad for the economy and worse for democracy.
"Maybe a non-unionized mbe would like a waiver, but not for any reason that I can see other than to keep union shops from being able to bid." A waiver doesn't keep union shops from being able to bid. Excessive costs may keep union shops from winning the bidding. So what you are really saying is that you want to use my tax money to pay higher than necessary rates.
I note that a union contractor is pretty much always precluded from taking work for less than union wage rates. Precluded by the terms of the union/employer agreement, not price.
"So what you are really saying is that you want to use my tax money to pay higher than necessary rates."
Higher than necessary to recruit the labor needed - yes, that is possible. It is a "living wage" as opposed to a wage that may cause us to use our tax dollars for "safety net" expenses (free medical care, food stamps, jails, prisons, welfare, etc.).
If the purpose of the project is to simply build a structure, and no one cares how little the labor is paid, waiver of D-B may make sense.
If one cares about putting a bit more money in circulation, to help float the economy in the area, having D-B in place may be efficient. If we end up paying construction tradesmen like we do longshoremen in LA ($100-200k per year with overtime), I would agree we have gone too far. If we have tradesmen netting $30-$60k per year, we may be in the sweet spot. If tradesmen are at $12-16k per year, we may be penny wise and pound foolish.