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.