Market advocates have a golden opportunity to not only reign in federal spending but to introduce much-needed privatization in the infrastructure sector.
Senator Mike Lee (R-UT) and Rep. Steve King (R-IA)’s respective bills, S. 244 and H.R. 743, which would repeal the Davis-Bacon Act (DBA), have gained considerable traction over the past year. Under the DBA, which dates back to 1931, all construction projects that receive federal funds must pay workers the local prevailing wage, which often turns out to be an artificially elevated union wage.
The Beacon Hill Institute illustrates how the Wage and Hour Division (WHD) at the Department of Labor is the main culprit behind this cost inflation:
The WHD methods inflate wages, on average, by 22%. It comes as no surprise that the WHD methods produce estimates biased in favor of high-cost, union labor. We compared the estimates reported by the WHD to the estimates reported by BLS for a sample of nine occupational categories accounting for 59% of all construction workers across 80 metropolitan areas.… on average the DBA prevailing wage is almost $4.43 per hour … above the BLS average wage when wages are weighted according to the number of workers in each trade and each metropolitan area.
As a result, the DBA effectively drives up the costs of labor on federal construction projects, leading to higher construction costs and higher taxes.
Particularly when states are stuggling financially, to keep up with basic infrastructure such as roads, it makes sense to find ways to drive down costs — not to mention our national debt, which now exceeds $20 trillion. In addition to lower costs, a DBA repeal would be a positive step towards more competition, with other benefits, such as speed of completion.
Even the Congressional Budget Office agrees:
If this policy change was implemented, the federal government would spend less on construction, saving $13 billion in discretionary out-lays from 2018 through 2026, the Congressional Budget Office estimates.
But this is only the tip of the iceberg.
With social justice being all the rage these days, one would think that these same activists would be looking to repeal the DBA. The DBA has a racist origin that progressives refuse to acknowledge. Cato scholar David Bernstein highlights this untold history:
Passed at the beginning of the Depression at the instigation of the labor union movement, Davis-Bacon was designed explicitly to keep black construction workers from working on Depression-era public works projects. The act continues today to restrict the opportunities of black workers on federal and federally subsidized projects by favoring disproportionately white, unionized and skilled workers over disproportionately black, non-unionized and unskilled workers.
The DBA served as a harbinger to the cornucopia of unconstitutional, interventionist measures featured throughout the New Deal. This trend has resulted in unprecedented degrees of government overreach in economic affairs over the past 80 years.
Ultimately, the DBA is an antiquated piece of legislation that stifles competition and favors entrenched interests like labor unions at the expense of minorities. A full repeal of the DBA would mark a significant step in reversing this trend of ever-expanding government and bring market forces back into the infrastructure sector.