Labor Wins ‘Prevailing Wages’ in Stimulus

Created: March 31, 2009 00:10 | Last updated: July 31, 2020 00:00

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Though stymied on the Employee Free Choice Act, which would make it easier for workers to form unions, organized labor is about to claim a big consolation prize: the massive application of a law guaranteeing “prevailing wages” for hundreds of thousands of construction workers hired under President Obama’s economic stimulus program.

Secretary of Transportation Ray LaHood is now preparing guidelines that will expand the scope of the 1931 Davis-Bacon Act, according to a department spokesperson.

“In some cases, the Davis-Bacon prevailing wage provisions will apply to federal construction contracts in the same manner as they currently apply,” said spokesperson Dolline Hatchett in an email. “In other instances, the prevailing wage provisions will apply to certain projects that may not have been subject to the Davis-Bacon provisions in the past.”

LaHood’s action will put a floor under wages paid for the more than 678,000 construction jobs (pdf) that the White House estimates will be created by the end of 2010. It also marks a sharp reversal of U.S. policy on public works projects under President Bush, who in September 2005 suspended Davis-Bacon in the Gulf States after Hurricane Katrina.

“This is good news for American workers,” said Tom Owens, director of communications for the Building Construction Trades Department of the AFL-CIO . “Everything in the stimulus program is covered. Congress was very clear about prevailing wages.”

Marc Freedman, director of labor law policy at the U.S. Chamber of Commerce, calls the Davis-Bacon standards “complicated and counterproductive” but conceded opponents have limited means to fight the measure because the stimulus legislation is so explicit.

The legislation, approved by Congress and signed by President Obama last month, mandates that all “laborers and mechanics” on projects “funded directly by or assisted in whole or in part” by the stimulus program have to be paid at least as much workers on similar projects in the same area, as determined by the Department of Labor. (pdf)

With $49.3 billion for transportation construction, $5 billion for home weatherization projects, and billions for other building projects, the application of Davis-Bacon standards will have rare historical impact.

“This is huge,” said Ross Eisenbray, vice president of the Economic Policy Institute, a pro-labor think tank in Washington. “The only uses of Davis-Bacon comparable to the stimulus bill are the Defense Highway Act of 1956 which created the interstate highway system and the New Deal programs of the 1930s.”

The stimulus “is the perfect example of why you need Davis-Bacon,” Eisenbray said. “If you didn’t have it, the contractors bidding for all this federal money could undercut prevailing wages in any given area by 20-30 percent, and they could get the contract and bring down wages in that area.”

The 1931 law, written by Sen. James Davis (R-Pa.), who had served as secretary of labor in the 1920s, and Rep. Robert Bacon (R-N.Y.), guaranteed “prevailing wages” as a way of protecting workers in a time of rapidly growing unemployment and government involvement in the economy. It was signed into law by President Herbert Hoover and has rankled free-market conservatives ever since.

Davis-Bacon relies on government-issued tables (available here) that tells employers in each of the 50 states, plus Washington, exactly what they must pay workers in four categories of federally funded construction–“building,” “heavy,” “highway” and “residential”—that are also carefully defined. The Wage and Hour Division of the Labor Department, determines who gets what.

The standards also include benefits in its definition of “prevailing wages,” giving local unions indirect influence over non-union pay. In Washington, for example, residential electricians on federal projects must be paid at least $16.10 per hour plus $3.10 an hour in benefits, according to the law. In Los Angeles, a residential electrician need only be paid $7.73 an hour under Davis-Bacon, and no benefits.

Contrary to popular belief, and a recent Fox News report, Davis-Bacon does not require the payment of union wages.

Conservative critics say the law will hinder the goals of the stimulus program.

“By inflating the cost of labor, Davis-Bacon means that less work will get done and less energy gets saveed” says James Sherk, a labor analyst at the conservative think tank, Heritage Foundation.

Despite efforts to repeal the law over the years through legislation introduced by Rep. Ron Paul (R-Tex.) or lawsuits brought by conservative-leaning groups, the law has remained politically popular. In November 2005 pro-labor Republicans, including LaHood, pressured President Bush into reinstating Davis-Bacon wages for Katrina reconstruction projects.

The Davis-Bacon standards are not controversial in the transportation construction business, according to Jack Basso, director of program finance management for the American Association of State Highway and Transportation Officials. “It has been pretty much factored into the cost of doing business,” he said. Basso said the law’s provisions will cover virtually all workers paid by the $49.3 billion stimulus money allocated to highway, aviation and public transportation projects.

More novel is the expected application of Davis-Bacon to the the Department of Energy’s Weatherization Assistance Program, which pays non-profits and local government to implement energy efficiency measures in low-income households. The $5 billion for weatherization stimulus spending is expected to create 87,000 jobs nationwide, according to the energy department.

In 2004, the Bush administration rejected the idea of paying Davis-Bacon wages for work done under the weatherization program. In a Powerpoint presentation found on the agency’s Web site, two Bush officials declared the weatherization program was “exempt from all provisions ” of Davis-Bacon. Earlier this month, director of the weatherization program, Gil Sperling, reversed that decision with a provisional memo that is subject to LaHood’s guidance.

“The last thing we want to see is weatherization jobs turning into a dead-end occupation where somebody caulks windows for nine bucks an hour and then is out of work,” said the AFL-CIO’s Owens. “We want green jobs to be good jobs, and prevailing wages help.”

Freedman of the Chamber of Commerce predicts administrative waste, saying the administration is “expecting organizations that have never administered Davis-Bacon to enforce it.”

One issue that LaHood will have to clarify, said EPI’s Eisenbray, is how the law applies to educational spending in the stimulus bill.

“There is stimulus money going to local education agencies that doesn’t really have any strings attached to it,” he said. “If those agencies use that money for school repairs or school construction, Davis-Bacon will be an issue. I would expect the secretary to say if the money comes from the Recovery and Reinvestment Act, you have to pay prevailing wages.”

In an interview with Roll Call last month, LaHood spoke positively of the law, saying “These are very skilled people that are going to be building roads and bridges, and Davis-Bacon provides an opportunity for them to be compensated in a way that reflects the kind of professionalism they bring to the job.”

Critics of Davis-Bacon have low expectations of LaHood. “[LaHood's] not a conservative on labor issues,” Sherk said.

Freedman said, “If the department issues a proposed regulation, not just a guidance, then we will be involved in commenting. But the law is pretty clear about ‘This is what thou shalt do.’ It remains to be seen if there’s any flexibility.”

The only consolation for labor’s opponents is that LaHood has delayed his decision. Last week, a spokesperson said he would issue the guidance within the week. On Thursday his office withdrew that schedule in favor of a statement that said he is still preparing the guidance.