How Trump and the Congressional Black Caucus can prevail over unemployment

In President Trump’s first meeting with Congressional Black Caucus leaders last week, equal economic opportunity for all — a universally shared American value — was the touchstone of policy discussions from crime abatement to infrastructure.

Unfortunately, a nearly century-old government doctrine enshrined in the Davis-Bacon Act of 1931 and commonly called prevailing wage requirements undermines this national aspiration by killing jobs and raising consumer prices, particularly among America’s least privileged. 

Prevailing wage regimes mandate taxpayers pay bureaucratically determined prices for contract labor on government projects. Ostensibly, this calculation reflects average costs for the industry and region in which projects take place.

This innocuous sounding goal is rarely achieved as Washington technocrats nearly always sends taxpayers a higher bill without any benefit to safety or quality. In fact, artificially increasing prices hurts our economy by expanding inequality of job opportunities across socio-economic lines. 

A full 100 percent of federal government contractors are overpaid compared to private sector workers in the same industry. Prevailing wages in Pennsylvania led to government contractors being paid 17 percent more than private sector workers who were performing the same jobs.

Michigan’s prevailing wage requirement increases labor costs by 40 to 60 percent, despite workers on projects not subject to these laws being more productive on a dollar-for-dollar basis. The federal government’s nonpartisan Congressional Budget Office projects repealing Davis-Bacon would save taxpayers nearly $13 billion.   

That these mandates inflate costs is generally undisputed, but the economic damage extends beyond budgeting. Any student of economics knows that when government inflates the price of labor, unemployment rises.

Most harmed are already economically disadvantaged workers, like those without higher education who are about 20 percent less likely to get work under laws like Davis-Bacon. These regimes are sold as a boon to workers, but in fact, only falsely boost a select class at the expense of the rest of America. 

Supporters argue these laws promote worker safety, increase productivity and quality, ensure fairness, and preserve the American standard of living. In truth, empirical research gives no evidence that prevailing wage requirements have these effects. And on questions of fairness and preserving standards, advocates ignore how these laws destabilize the economic playing field.

Indeed, Occupational Safety and Health Administration data shows states without prevailing wage requirements had lower average rates of injury and death on jobsites than states with them. Other government analysis determined injuries were 25-27 percent more frequent in states with these regulations.

Conflicting findings exist, illustrating the misleading nature of supporters’ claims — the fact is, there is no body of support for the argument that taxpayer-funded wage mandates improve safety.

Assertions of higher quality output are even more dubious. After its legislature exempted school construction projects from the prevailing wage regime, Ohio’s government found in two separate surveys that more than 90 percent of those who used the schools believed renovations were of higher or equal quality without the mandate — after two years of use, twice as many people reported that quality was higher without it. Kentucky’s government came to similar conclusions.

Examples abound of cost overruns and long delays with government contracts under prevailing wage rules, from transit projects to nuclear waste facilities to veterans’ hospitals — these laws provide no guarantee of improved quality.

If the prevailing wage story ended with higher costs to taxpayers and zero measurable public benefit, the case for repealing Davis-Bacon and similar laws would be compelling. However, far worse than just wasting money, these mandates harm consumers and workers, with the most drastic impact on society’s most vulnerable.

University of California, Berkeley researchers found low-income housing construction under prevailing wage requirements forced higher rent on eventual occupants and reduced the number of units built by 16 percent.

In New York City, this increase in monthly rent amounts to $400. Further, empirical research shows that for each dollar over fair market wages that these laws mandate, roughly 140,000 jobs are lost, with over 75 percent of those losing out being of a racial minority. Prevailing wage standards inflate contractor hourly wages by over $4 on average — that’s more than half a million Americans put out of work. Claims of fairness fall flat when considering the nearly seven percent average increase in wage growth when prevailing wage mandates are repealed.

If preserving American living means keeping women and minorities unemployed while using taxpayer money to subsidize wages at politically favored businesses, President Trump and Congressional leaders from both parties must reject preservation.

Americans thrive when we are free to live and work without undue government interference, politically motivated laws like Davis-Bacon hold our economy back and further embed barriers to opportunity.

Al Downs is a senior economic analyst at Americans for Prosperity.

The views of contributors are their own and are not the views of The Hill.