Biden Admin’s ‘Prevailing Wage’ Overhaul Takes Union Wages as Standard, Says Trade Association

Construction crews work to complete a new medical facility at the University of California–Irvine in Irvine, Calif., on July 13, 2023. (John Fredricks/The Epoch Times)

In the latest “pro-union” push from the Biden administration, the Department of Labor (DOL) announced the final rule updating the Davis-Bacon Act and related regulations on Tuesday. Construction trade advocates pushed back immediately, insisting the rule change requires the industry at large to adhere to union standards, effectively undermining the “merit shop.”

The rule deals with how much workers are paid on federally funded projects.

The Associated Builders and Contractors (ABC), a trade association, had submitted a report when the DOL first proposed the rule change in 2022, and issued a critical statement on the same day as the announcement.

“This is yet another Biden administration handout to organized labor on the backs of taxpayers, small businesses and the free market,” said ABC Vice President of Regulatory, Labor, and State Affairs Ben Brubeck, according to the press release.

Mr. Brubeck said feedback from ABC and other construction industry stakeholders, including small businesses, were disregarded in the proposal of “costly and burdensome regulation,” and characterized the “update” as a “reversal” to reforms established 40 years ago.

DOL touted the changes as a win for labor, raising wages to align with the “modern economy” as the federal government continues its infrastructure spending.

“This updated rule will create pathways to the middle class for more families and help level the playing field for high-road employers because companies who exploit their workers, or who don’t pay workers fairly, should never have a competitive advantage,” said Acting Secretary of Labor Julie Su.

DOL proposed 50 changes to the regulations, but the changes in determining the “prevailing wage” are the ones most concerning to watchdogs.

Smaller Surveys

Vice President Kamala Harris touted the rule change on Tuesday, saying a $17-per-hour construction job in Allegheny County, Pennsylvania, today could be a $28-per-hour job tomorrow, attributing the change to the “problem” of the Davis-Bacon Act not being updated for 40 years.

The Davis-Bacon Act was reformed a number of times and expanded greatly in the 1940s and 1950s to cover military construction, after which many called for its repeal because of an increase in costly government projects.

The Reagan administration reformed the Act in the 1980s, determining that if a single wage rate was paid to more than 50 percent of workers in that classification, the federal project would adhere to that wage. If not, it would rely on a weighted average of wages paid in that classification.

The change—which follows a pre-Reagan era standard—would require a smaller survey of wages. If there is no majority wage rate in that classification, a survey of 30 percent of workers’ wages can be used to set the rate.

This is where the majority of contention has been raised.

“It only takes a basic understanding of math to know that 30 percent is not a majority and therefore cannot be said to be ‘prevailing’ in any common understanding of the term,” wrote Competitive Enterprise Institute labor policy expert Sean Higgins after the rule change announcement.

“This new rule will allow for cherry-picked statistics that result in wage inflation, driving up the costs of those contracts.”

The industry concern is that the “30 percent” survey will be sampled from union jobs and end up inflating the cost of construction, according to ABC, which pointed out that only 11.7 percent of the construction industry is unionized.

ABC said it would take “appropriate legal action” to prevent implementation of the rule, signaling a lawsuit that may stall the rule from taking effect in 60 days.

Calls for Repealing Davis-Bacon

The Biden administration’s decision to turn back the clock on the Davis-Bacon Act faced criticisms. Budget watch organizations have pointed out many times over the years that repealing the Act could be a major money saver.

Beacon Hill Institute published a report (pdf) last year on the costs of the Davis-Bacon Act and concluded it was an “archaic, biased, and convoluted process in need of significant reform.”

It found that the wage survey process, as set by the DOL’s Wage and Hour Division, was lengthy, ineffective, and led to union domination of the process, and on average inflated wages by more than 20 percent and inflated construction costs by 7.21 percent.

The Congressional Budget Office, which calculates various policy options for reducing the federal deficit but does not make recommendations, found that repealing the Davis-Bacon Act would save $24.3 billion between 2023 and 2032. The Heritage Foundation determined it would have saved $86 billion between 2016 and 2025. Calls for the repeal of the Act occur from time to time, with varying levels of support.

As recent as February, a bill to repeal the Act was introduced in the House.