The Heritage Foundation

Executive Memorandum #299 on Jobs, Jobs and Labor Policy

April 9, 1991

April 9, 1991 | Executive Memorandum on Jobs, Jobs and Labor Policy

Congress Vs. Minorities: The New Davis-Bacon Rules

The Department of Labor wants to create job opportunities for tens of thousands of American workers, many of whom are minority, poor, or unskilled. The Department plans to do this by expanding the use of helpers on federal construction projects regulated by the 1931 Davis-Bacon Act. Yet Congress is attempting to block these efforts. To protect high-paid union workers at the expense of low income workers, Congress has tacked provisions onto the Persian Gulf emergency spending bill (H.R. 1281), soon to arrive on George Bush's desk for signature, that would prohibit the Labor Department from using funds to relax the regulations now preventing less skilled minority youth from working on federal construction projects.

The Bush Administration correctly opposes this provision. The big labor lobby reckons apparently that Bush will feel that he has to sign the bill to cover the war costs incurred by non-defense agencies, even though the bill now contains the anti-minority provisions regarding federal construction. The Davis-Bacon Act for years has denied federal contracts to small construction firms, many of them owned by minorities, and jobs to low income workers. Bush should veto the bill, telling Congress that he will not allow the Persian Gulf bill to be held hostage to such anti-minority measures. Or the President might use his power of "constitutional excision" and simply cross out the offending provision from the bill. In either case, the President then should throw his political weight behind the effort by Representative Charles Stenholm, the Texas Democrat, to repeal the Davis-Bacon Act altogether and thereby provide job opportunities for tens of thousands of Americans.

"Super-Minimum" Wage. The Davis-Bacon Act, passed in the depths of the Great Depression, requires contractors to pay all workers on federally funded construction projects valued at more than $2,000 the "prevailing wage" as determined by the Department of Labor. In practice, however, the Labor Department has tended to avoid making the complicated wage calculations for each job classification. Instead it uses local union wage scales as a proxy for the "prevailing wage." Since the union wage is significantly more than the market wage, this sets a "super-minimum" wage for each classification. This higher wage in turn sharply reduces the pool of eligible workers likely to be hired at that wage. Usually only union workers meet the wage test. Traditionally the big losers in this process have been minorities -- those who are at the entry level or those who cannot break into the union ranks.Yet individual workers are not the only victims of Davis- Bacon. Minority and small contractors suffer also. Most of these contractors are non-union and feel that paying Davis-Bacon wages on a few federal projects a year would so disrupt their pay scales that it is not worth the trouble or the administrative costs even to bid on government projects. Most of these contractors, therefore, never bother to bid on a Davis-Bacon regulated project.

Davis-Bacon openly was intended to discriminate against blacks, and that is precisely what it has done. The original Davis-Bacon Act was drafted in 1927 by New York Republican Congressman Robert Bacon after an Alabama contractor won the bid to build a federal hospital in Bacon's district. As Bacon stated in the first hearing on the bill, "The bid... was let to a firm from Alabama who brought some thousand non-union laborers from Alabama into Long Island, N.Y., into my congressional district." What Bacon was hinting at was that many of the workers were black, and willing to work for less than local building tradesmen. The debate on the bill took matters beyond hinting. When the final bill was debated on the House floor on February 28, 1931, Alabama Congressman Miles Allgood argued for the Act, stating: "That contractor has cheap colored labor... and it is labor of that sort that is in competition with white labor.. . This bill has merit... [and] it is very important that we enact this measure."

Poison to Minorities. For nearly six decades Davis-Bacon has harmed minorities. According to Ralph C. Thomas III, executive director of the Washington, D.C.-based National Association of Minority Contractors, "The law in its current form is poison to minority contractors [and to] minority employment in general.... The law stifles the minority contractors' efforts to not only hire as many minority workers as possible, but it also hinders minority contractor efforts to introduce new workers into the construction field."

In an effort to give more opportunities to lower skilled workers, the Department of Labor set out in 1982 to change the regulations that generally had precluded "helpers" from working on federally funded construction projects. Lower-skilled and thus lower-paid "helpers" systematically were excluded from federal construction projects by regulations that were "rigged" in favor of higher paid skilled workers regardless of the tasks required. Example: if a worker who was really a low-skilled "helper" picked up a hammer, he was declared a "carpenter" and, therefore, must be paid a higher wage. Not only does this discriminate against minorities, it adds billions of dollars to federal construction costs, contributing to high budget deficits and high taxes.

The American Federation of Labor-Congress of Industrial Organizations (AFL-CIO), whose members often benefit from Davis-Bacon, sued the Department of Labor in 1982 to block any further enforcement of the new regulations. After nearly eight years of litigation the Department of Labor won on appeal and last February renewed its efforts to enforce the regulations that would allow contractors to use the lower-paid helpers on federally supported projects.

Big Labor Roadblock. The big labor lobby then struck back through an amendment attached to the emergency spending bill by Congressman John Murtha, the Pennsylvania Democrat. The amendment effectively would withhold the funds that the Labor Department needs to carry out the new policies and prevents the Department from administering "any other regulation that would have the same or similar effect." The White House's Office of Management and Budget declared its opposition to the Murtha provision this March 7 in a "Statement of Administration Policy."

Bush can make a strong statement of his support for expanding employment opportunities for minorities and low-income workers by vetoing this bill and sending it back to Congress for revision. Given the President's popularity, Congress would not be able to hold Persian Gulf money hostage to its job-destroying agenda. Or to avoid such a situation entirely, Bush could take an even bolder approach. A number of constitutional scholars suggest that Davis-Bacon violates the Constitution because it discriminates against minorities. If this is the case, as it clearly seems to be, Bush has the power through "constitutional excision" to eliminate the offending sections from an appropriations bill. In his only previous use of this power, on November 3, 1989, when Bush struck a provision from an appropriations bill, Congress did not challenge him. Whichever approach he takes, however, the President should announce his support for efforts by Congressman Stenholm and others to repeal the Davis-Bacon Act entirely as a means to provide job opportunities to minorities.

Scott A. Hodge, Former Grover M. Hermann Fellow in Federal Budgetary Affairs

Andrew J. Cowin, J.D., Former Research Associate

Related Issues: Jobs, Jobs and Labor Policy