On September 8, President George W. Bush exercised the power granted to him in the Davis-Bacon Act and suspended that Act's application to federally funded construction projects in the Gulf Coast areas hit by Hurricane Katrina. With this step, President Bush eliminated the wage premium that Davis-Bacon effectively requires for those hired to work on federal construction projects, reducing the costs of reconstruction. As a result, federal aid to the Gulf States will now yield more benefits to the region's beleaguered residents and hasten the recovery effort.
As written, Davis-Bacon requires that contractors working on federally funded construction projects pay all of their workers the area's "prevailing wage," as determined by the Wage and Hourly Division of the U.S. Department of Labor. Study after study has demonstrated that these so-called prevailing wages are much higher than an area's market-based wages and thus lead to higher costs for federal projects. Recognizing that this cost inflation can be especially counterproductive (as opposed to merely counterproductive) during an extreme emergency, the law allows the president to suspend its application when tragedy strikes. Since the law's enactment during the Depression, it has been suspended three times previously: once by President Roosevelt, once by President Nixon, and most recently by President George Herbert Walker Bush in the aftermath of hurricane Andrew in 1992.
President George W. Bush is to be commended for showing the courage to take this important but controversial stand as the Gulf Coast region enters this difficult period of recovery and reconstruction. In the days that follow, he will confront many similar challenges and have to make many similarly difficult decisions, and not all of his choices will be popular with influential groups. In the case of the Davis-Bacon suspension, for example, some union leaders and their supporters in Congress will certainly be angry at the prospect of losing an unfair advantage, even if that advantage would have come at the expense of those whose lives have been destroyed by Katrina.
While the potential cost savings from suspending Davis-Bacon are significant, the moral dimension of the President's decision is also of consequence because he took the initiative to suspend a federal regulation which was originally intended to deny economic opportunity to African-American workers in the South. Introduced in Congress in the early days of the Depression by Senator Davis of Pennsylvania and Representative Bacon of New York, the bill came in response to a building contract that the federal government awarded to a company whose low bid was based in part on its intention to use lower-cost African-American workers from the South on the project. By forcing all contractors to pay above-market wages, contractors no longer had the incentive to use less costly Southern workers-and could thus afford to discriminate by race because there was no longer any incentive to hire less expensive labor. As Alabama's Rep. Clayton Allgood noted at the time, "Reference has been made to a contractor from Alabama who went to New York with bootleg labor. This is a fact. That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country."
That the President had the good sense to suspend this discriminatory legislation in response to an emergency whose victims were disproportionately African-American is to his considerable credit and adds to the courage he showed in denying the politically powerful labor unions the unfair benefits they would otherwise have reaped from others' misfortune. In the weeks and months that follow, let this bold action be an example to others, notably Congress, whose members should be prepared to make similar sacrifices that may be unpopular with influential constituencies.
Ronald D. Utt, Ph.D., is Herbert and Joyce Morgan Senior Research Fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.