For nearly 80 years, contractors working on federally funded construction projects have been forced to pay their workers artificially inflated wages that rip off American taxpayers while lining the pockets of organized labor. The culprit is the Davis-Bacon Act of 1931, which requires all workers on federal projects worth more than $2,000 to be paid the "prevailing wage," which typically means the local union wage.
Here's what happens. Unskilled construction workers possess one clear advantage over their skilled, unionized competitors: They're willing to work for less money. But Davis-Bacon destroys that advantage. After all, why would contractors working on a federal project hire any unskilled workers when the government forces them to pay all of their workers what amounts to a union wage? Contractors make the rational choice and get their money's worth by hiring skilled unionized labor even when the project calls for much less.
Davis-Bacon is a blatant piece of special-interest, pro-union legislation. It hasn't come cheap for taxpayers. According to research by Suffolk University economists, Davis-Bacon has raised the construction wages on federal projects 22 percent above the market rate.
James Sherk of the Heritage Foundation finds that repealing Davis-Bacon would save taxpayers $11.4 billion in 2010 alone. Simply suspending Davis-Bacon would allow government contractors to hire 160,000 new workers at no additional cost, according to Mr. Sherk.
To make matters worse, the Davis-Bacon Act has explicitly racist origins. It was introduced in response to the presence of Southern black construction workers on a Long Island, N.Y.. veterans hospital project. This "cheap" and "bootleg" labor was denounced by Rep. Robert L. Bacon, New York Republican, who introduced the legislation. American Federation of Labor (AFL) president William Green eagerly testified in support of the law before the U.S. Senate, claiming that "colored labor is being brought in to demoralize wage rates."
Emil Preiss, business manager of the New York branch of the International Brotherhood of Electrical Workers (a powerful AFL affiliate that banned black workers from its ranks) told the House of Representatives that Algernon Blair's crew of black workers were "an undesirable element of people." The bill's co-sponsor, Republican Sen. James Davis of Pennsylvania, was an outspoken racist who had argued in 1925 that Congress must restrict immigration in order "to dry up the sources of hereditary poisoning."
The result was that black workers, who were largely unskilled and therefore counted on being able to compete by working for lower wages, essentially were banned from the upcoming New Deal construction spree. Davis-Bacon nullified their competitive advantage just when they needed it most.
More recently, the Obama administration extended Davis-Bacon via the American Recovery and Reinvestment of Act of 2009, known as the stimulus bill. According to an All-Agency Memorandum issued by the Department of Labor, Davis-Bacon now applies to all "projects funded directly by or assisted in whole or in part by and through the Federal Government."
In other words, even projects that are only partially funded by the stimulus must obey the costly pro-union requirements of Davis-Bacon. With the economy floundering and the government apparently set on another New Deal-style construction spree, the last thing taxpayers needed were rules that force stimulus projects to cost even more.
In sum, we have a law that drives up the costs of federal projects, hurts unskilled workers, unfairly advantages organized labor and has explicitly racist roots. It's time for Davis-Bacon to go.
Damon W. Root is an associate editor at Reason magazine and Reason.com.