The Biden Administration’s Discriminatory Labor Scheme

Nearly one year to the day after President Joe Biden signed the radically misnamed “Inflation Reduction Act,” which was little more than an enormous handout to the environmental lobby, the White House has announced yet another policy designed to appeal to a specific interest group ahead of the 2024 election.

During a speech in Philadelphia last week, Vice President Kamala Harris unveiled changes to labor regulations which she said would raise wages for construction workers amounting to “thousands of extra dollars” in their pockets. In reality, however, the new rules are designed to advantage politically powerful construction unions at the expense of non-union workers.

Specifically, Harris was referencing “updates” made by the Labor Department to the Davis-Bacon Act of 1931, a law that requires the payment of “prevailing local wages” on federally financed public works projects. As justification for the change, Harris claimed that “many workers” on federal projects “are paid much less than they deserve, much less than the value of their work, and not just by a little…And that is wrong.”

Harris promised that more than one million construction workers with jobs on roughly $200 billion worth of federally supported projects will benefit from the change, “which will mean thousands of extra dollars per year in workers’ pockets to help put a down payment on a home, save for retirement, or simply have more breathing room.”

By way of background, the Davis-Bacon Act of 1931 was enacted after several years of pressure from Pennsylvania Democrat Senator and former Labor Secretary James Davis, joined by Massachusetts Republican Representative Robert Bacon of New York. Bacon introduced the act after receiving complaints about the hiring of African American workers from Alabama (early in the Great Migration of blacks northward) to build a Veterans’ Administration hospital in his district.

Some of Bacon’s constituents objected to the hiring of blacks for low pay (which was still more than they would have earned in the south), believing that it would drive wages down across the board. Once the Great Depression began, complaints from workers elsewhere about losing jobs to those willing to work for less, along with concerns from Congressmen that their efforts to bring home “pork barrel” projects to their districts didn’t result in jobs for their own voters, induced the Hoover Administration to urge Congress to enact the Davis-Bacon Act, which it promptly did.

As noted by economist Walter Williams, the bill was explicitly supported on racial grounds by American Federation of Labor president William Green, who complained, “colored labor is being sought to demoralize wage rates.” (At the time, black workers were almost completely excluded from construction unions.) Georgia Congressman William David Upshaw, a staunch defender of the Ku Klux Klan, was also a supporter of the bill, and is said to have “smiled” on the floor of Congress as representatives from northern states expressed alarm about a supposed “oversupply” of southern black workers.

Davis-Bacon was also the precursor to the first national minimum wage law applying to workers in most private businesses, the Federal Fair Labor Standards Act of 1938, one of the final elements of Franklin Roosevelt’s New Deal.

The major change in Davis-Bacon announced by Harris is a revision in the way that “prevailing wages” are calculated. From 1931 to 1983, the prevailing wage was tied to “the wage paid to at least 30 percent of workers.” In 1983, the Reagan administration changed that figure to 50 percent. Now, the Biden Labor Department is reverting back to 30 percent, in effect eliminating more lower-wage workers from the calculation.

As the change indicates, the notion of a “prevailing” wage is an arbitrary one, being designed, in practice, to ensure that contractors won’t be able to hire workers for less than the prevailing union wage. In other words, whereas Davis-Bacon was originally designed to exclude black workers from employment on government projects, its chief aim now is to prevent nonunion contractors from winning work on government projects.

By reducing competition among both contractors and workers, this inevitably raises the cost of government projects, meaning that fewer such projects will be built, and/or that taxes will have to be raised to finance them.

Contrary to Harris’s claim, the only way to ascertain the “prevailing” wage in a given area is to solicit bids from all qualified firms. Contractors will then be compelled by market forces to pay wages sufficient to attract enough competent workers to do the job.

Recognizing the superfluity of Davis-Bacon, especially in view of the subsequently enacted federal minimum wage law, Congress’s General Accounting Office (GAO) published a report in 1979 titled “The Davis-Bacon Act Should Be Repealed.” The report observed that the law “results in unnecessary construction and administrative costs of several hundred million dollars annually” (that would be billions nowadays) and had “an inflationary effect on the areas covered by it as well as on the national economy as a whole.”

While the GAO’s recommendation was not followed, the Reagan administration did alter it by making the aforementioned change from 30 percent to 50 percent. 

Again contrary to Harris, there is no way to demonstrate that workers on federal projects “are paid much less than they deserve,” let alone “the value of their work.” Prior to Reagan’s change, the Labor Department simply used union wages to determine what the “30 percent” standard entailed – as if it were up to union leaders to dictate government policy.

In a free economy, what workers “deserve” is normally set by the market: those who think that they deserve more than what an employer offers are free to look elsewhere for employment. While federal construction workers will undoubtedly gain from the mandated higher wages, the vast majority of workers and retirees will suffer from the resultant higher prices and higher taxes.

The inflation that this decision will generate also will certainly reduce the ability of many of the construction workers’ fellow citizens to buy a home, save for their retirement, or enjoy as much “breathing room” as they desire. Additionally, nonunionized workers seeking employment will lose out on the opportunity to obtain federally financed construction jobs – even while they pay for the projects with their taxes.

Above all, the announced change to Davis-Bacon demonstrates how far Americans’ capacity to live their lives freely has been usurped by a government that claims the authority to dictate what they “deserve.” In effect, such dicta amount to a return to the discredited reign of medieval Scholasticism, when religious authorities, and rulers guided by them, attempted to enforce what they defined as “just” wages and prices.

The result was economic stagnation, and severe constraints on the ability of enterprising and industrious individuals to advance in life. Of course, it also helped – then and now – to have sufficient political influence to sway the authorities’ decisions in your favor.

The racist origins of Davis-Bacon demonstrate how such power can be abused – just as in today’s practice of racial preferences, encouraged or mandated by government, which differ chiefly in the identity of the racial and ethnic groups that are targeted. Is this really the sort of government that a free people deserve?

David Lewis Schaefer is a Professor Emeritus of Political Science at College of the Holy Cross.