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Davis-Bacon: Racist Pork

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Last week, someone from the New York Times asked me to write a short piece arguing that Davis-Bacon should be repealed.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.

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Related Posts (on one page):

  1. "When Affirmative Action was White":
  2. Davis-Bacon: Racist Pork
Hans Bader (mail):
Bush was right to suspend Davis-Bacon in four States (Louisiana, Mississippi, and parts of Alabama and Florida), but he should extend the scope of the suspension to suspend the Act nationwide, as President Nixon did.

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.
9.23.2005 11:44am
Anderson (mail) (www):
Okay, will someone answer what's puzzling me? I confess my economic illiteracy.

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?
9.23.2005 12:20pm
spencere (mail):
I read your paper and if I were grading it you would get a failing grade.

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.
9.23.2005 12:23pm
Henry T:
So, to summarize Yglesias' argument, Democrats should support Davis-Bacon, even if it's bad public policy, because it's like making the government tithe to the Democratic party every time it builds something.

I see the practical benefits, but it seems like an awfully unprincipled argument...
9.23.2005 12:35pm
Goober (mail):
What, no "Bacon's pork isn't kosher" joke?
9.23.2005 12:40pm
Steve:
Interesting that the GOP is in favor of using the market power of the federal government to pay contractors less than the prevailing wage, but against using the market power of the federal government to obtain cheaper prescription drugs for Medicare participants. What could be the common thread between these two seemingly contradictory positions?
9.23.2005 12:52pm
cfw (mail):
"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."

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.
9.23.2005 12:54pm
Hans Bader (mail):
The enforcement of the Davis-Bacon Act doesn't need to be racist in motivation today for it to be unconstitutional. It only needs to have been racist in the motivation for its original passage.

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."
9.23.2005 1:13pm
Cold Warrior:
I'm afraid I don't follow the reasoning. Assume (as convincingly argued by Bernstein) that Davis-Bacon originated as an attempt to exclude Gov't contracts from flowing to non-union African-Americans. O.K. so far. But:

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.
9.23.2005 1:33pm
cfw (mail):
I represent a unionized mbe/dbe contractor and a non-unionized contractor. Neither wants to see any waiver of D-B.

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.
9.23.2005 2:20pm
Jacob T. Levy (mail):
David's work on Davis-Bacon (which I've learned a great deal from for a long time now) dovetails nicely with Ira Katznelson's work in his new book, _When Affirmative Action Was White_. The latter discusses how the New Deal and Truman's successor programs (e.g. G.I. Bill of Rights) in effect bulked up Jim Crow with federal dollars. In order to get the programs passed FDR and Truman consistently finessed them to make theme compatible with southern white privilege, thereby actually strengthening Jim Crow by providing it with more resources and more insulation from market forces. David and Katznelson draw different normative conclusions about what follows, sixty years later, but the historical accounts reinforce each other.
9.23.2005 2:35pm
Razon Lemur (mail):
That's a rather gross distortion of Yglesias's argument, David, and damages your own credibility to phrase it in such a way.

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.
9.23.2005 4:30pm
byrd (mail):
A dozen years ago I worked for a landscaping company that had mostly private property contracts, and a few local government contracts. The government jobs fell under the "prevailing wage" law and paid about 2/3's more than the other jobs. Same work, vastly different pay scales.

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.
9.23.2005 6:02pm
arbitraryaardvark (mail) (www):
Davis-Bacon is only one example of a 20th century trend to institutionalize graft. In the bad old days of Tammany Hall or Boston Mayor John Fitgerald or Huey Long or LBJ, money was handed over in cash in brown paper bags to swing deals. These days, it's laundered via prevailing wages or campaign contributions and other means, all legal, with flocks of lawyers and accountants. Davis-Bacon and the new deal may have had an impact on unions building large pension funds and then being taken over by force by organized crime, which then looted the pension funds. Robert Kennedy's "the enemy within" tells this story. See also 'social security.' one of the factors in the Clinton impeachment was his role in rigging the teamster's election, which then kicked back money to the Clinton campaign.
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.
9.24.2005 2:16am
markm (mail):
"Interesting that the GOP is in favor of using the market power of the federal government to pay contractors less than the prevailing wage, but against using the market power of the federal government to obtain cheaper prescription drugs for Medicare participants. What could be the common thread between these two seemingly contradictory positions?" Support for the free market.

"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.
9.24.2005 1:24pm
cfw (mail):
"A waiver doesn't keep union shops from being able to bid. Excessive costs may keep union shops from winning the bidding."

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.
9.25.2005 9:01pm