In 1975, my wife and I bought a newly constructed home in Santa Rosa for $39,000. It had three bedrooms and two bathrooms, with an attached two-car garage. The price tag seemed like a fortune to us, which is why I was flabbergasted to learn that the new four-classroom wing of our daughter’s public elementary school was going to cost $1 million to build. The land was free. There was no garage. But each classroom was going to cost six times the cost of our entire home.
I called the architect on the project and asked, “Why?” His explanation came down to earthquake standards and something called Davis-Bacon/Prevailing Wage laws. Say what?
Seven weeks ago, I was reading an article in The Wall Street Journal by Glenn Hubbard, Dean of the Columbia Business School, about how to cut government spending. Nestled in Hubbard’s discussion of ObamaCare, Medicaid, Social Security and Medicare was this sentence: “And the Davis-Bacon Act, which inflates the price of federal construction projects by requiring high-cost union labor, has to be repealed.”
In between 1975 and seven weeks ago, I was alarmed to learn that the Cypress freeway in west Oakland cost $1 million per inch to rebuild after the 1989 earthquake. I commented on the bathrooms in Mount Tamalpais State Park that cost $1,300 per square foot to build and on the two parking lot guard shacks at Santa Rosa Junior College that cost $833 per square foot. I wondered privately at the staggering $120 million (and counting) price tag for the Green Music Center at Sonoma State University. How much of all of this is attributed to Davis-Bacon/Prevailing Wage laws?
I researched the Davis-Bacon Act, which was enacted in 1931 and extends to states under what are called Prevailing Wage laws. Virtually the first article I found was from the U.S. Department of Transportation, Federal Highway Administration. It was called “Highway History” and started with this paragraph: “In the 1920s, contractors found that they could pay African-American workers less than white employees, and thereby submit lower bids than contractors using white union workers. Many states passed laws that required contractors on public projects to pay workers the prevailing wage in that state as a way of reducing the prospect that contractors with underpaid workers—often out-of-state contractors importing African-Americans from the South—would secure contracts.”
So the history of Davis-Bacon/Prevailing Wage (D-B/PW) laws has some racial and union protectionism elements. Based on my recent interviews, nonunion contractors strongly believe the primary purpose of D-B/PW laws today is to protect unions. Here’s how it works.
Virtually every project involving government money and/or government land is subject to D-B/PW rules. This creates a gigantic bureaucracy in every state to determine “prevailing” wages and to enforce the rules. As the California Department of Industrial Relations (DIR) puts it, “All bidders are required to use the same wage rates when bidding on a public works project.” The DIR is the entity that determines such wages, county-by-county, for an amazing number of worker classifications. The DIR does it through surveys of employers. Note that the “prevailing” wage is not an average of what union and non-union employers pay their employees. In counties with unions, the union wage will almost always become the “prevailing” wage.
I spoke to the president of a company that does a lot of public works projects. He uses complex software that, in theory, can bid a job either “straight” (normal wages) or on a D-B/PW basis.
“But it’s never that easy,” he says. “A project can easily spread over two jurisdictions with different rates. The considerations for each and every employee are convoluted, arcane and ridiculous. What if a worker digs a shallow ditch [“laborer” rate] and then connects some irrigation lines [“plumber”]? If he also changes some light bulbs and then takes yard clippings to the compost plant, that’s two other job classes and different rates. There’s a different rate for a guy working on a small tractor with rubber tires than for the same guy working on a larger piece of equipment with metal treads. It drives us crazy, and it’s subject to payroll reporting rules, state audits and private lawsuits. Every prevailing wage project requires much more administration.”
Here are some examples: The “total hourly rate” prevailing wage for a boilermaker/blacksmith in Marin County is $72.33. In Sonoma and Napa counties, it’s $66.53 per hour. How about a “metal roofing systems installer”? The prevailing wage is $37 per hour in Marin and Sonoma counties, $61.46 in Orange County, $64.96 in Monterey County and $78.98 in San Mateo County. The prevailing wage throughout California for a “stator rewinder helper” starts at $22.86 per hour.
A “laborer,” depending on type of activity, is entitled to a total hourly rate from $35.86 to $44.88 per hour in Marin County and from $35.16 to $43.88 per hour in Sonoma and Napa counties. A journeyman “light fixture maintenance” worker in all three counties is entitled to a prevailing hourly wage of $33.89. A “traffic control” worker is entitled to a total wage from $40.79 to $44.29 per hour. A “carpenter” would be entitled to $62.48 per hour, and a “drywall installer” to $63.26 per hour. The prevailing wage list is almost endless.
The owner of a subcontractor company put the situation in clear terms for me. His workers aren’t unionized. They earn wages of $25 to $28 per hour, plus health coverage, pension contributions, sick leave, paid vacations and so forth. The owner believes this is a reasonable pay and benefits package. But the “prevailing wage” for his employees when they’re on a public works project in Sonoma County is more than $50 per hour. His estimate is that D-B/PW rules inflate the labor cost of all public works projects by 20 to 50 percent. “The idea of a prevailing wage is artificial as far as what the market will bear,” he says.
Another building industry executive was even more pointed in his remarks: “Prevailing wage determinations are ridiculed within the building industry,” he says. “They’re a colossal waste of taxpayer money. ‘Prevailing wage’ is an oxymoron.”
