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April 10, 2019
On March 29, the U.S. Department of Labor’s Office of Inspector General released an audit report on the prevailing wage rates mandated by the Davis-Bacon Act on federal or federally assisted construction projects.
Passed in 1931, the DBA requires contractors to pay no less than the local prevailing wage to on-site workers on federally funded construction projects costing more than $2,000.
Currently, the DOL’s Wage and Hour Division determines and updates these wage rates by conducting surveys to collect and compile data about hourly rates in four types of construction projects. For more than 20 years, the OIG, along with Office of Management and Budget, Government Accountability Office, U.S. Congress and other stakeholders, have raised concerns about the timeliness and accuracy of these rates, with a main concern being the potential bias produced by the voluntary nature of these wage surveys.
According to the report, the OIG found that, as of September 2018, 3% of WHD’s 134,738 unique published rates, roughly 4,400, had not been updated in 21 to 40 years.
Additionally, of seven sampled surveys that analyzed 124 wage rates, the OIG found 48% of the rates were not determined from data about a single construction worker within the 31 counties that the published rates represented.
The report found union wages prevailed for 48% of the wage determinations, despite the fact that just 13.2% of the U.S. private construction workforce is unionized.
Finally, the report found union wages prevailed for 48% of the wage determinations, despite the fact that just 12.8% of the U.S. private construction workforce is unionized. Furthermore, less than .01% of these 64,850 union wage rates were more than 10 years old, while 10% of the 69,888 nonunion wage rates were more than 10 years old. The report noted that union rates are typically updated when labor unions renegotiate collective bargaining agreements, while WHD must conduct new surveys to update nonunion rates.
As part of the report, the OIG listed eight recommendations to improve the overall quality and accuracy of DBA prevailing wage rates, which include developing and implementing a risk-based strategy to manage rates more than 10 years old and consulting with the U.S. Bureau of Labor Statistics to evaluate alternative methods to update wage rates, such as the Consumer Price Index and Occupational Employment Survey data. The OIG also noted contractors’ lack of participation in filling out these surveys and recommended continuing efforts to identify new strategies to increase participation and obtain more relevant wage rates.
In addition to advocating for repeal of the DBA, ABC has made numerous recommendations over the years that could have mitigated some of the act’s damage to the economy, including the use of BLS data for wage determinations.
Research has found that state prevailing wage requirements increase the cost of construction. In New York, a 2017 report released by the Empire Center for Public Policy found that prevailing wage requirements inflated the cost of publicly funded construction projects in the state by 13 to 25%. The state of Ohio saved almost $500 million following the state’s repeal of prevailing wage rules on school construction, according to an Ohio Legislative Service Commission study published by the state.
Because of their anti-competitive and inflationary impact, 24 states have no prevailing wage laws and a total of eight states have repealed or significantly reformed their prevailing wage laws since 2015.
The Congressional Budget Office estimates the federal government would spend less on construction, saving $12 billion in discretionary outlays from 2019 through 2028, if the Davis-Bacon Act was repealed, although industry stakeholders believe the overall savings would be much more, once accounting for the impact of repeal on state and local government-procured projects impacted by Davis-Bacon requirements.
The Beacon Hill Institute at Suffolk University in Boston found that wages on federally funded construction projects under the DBA are grossly inflated. The February 2008 study compared the methods used by the BLS and the DOL’s Employment Standards Administration’s Wage and Hour Division to determine the prevailing wage for workers employed on federally funded construction projects.
The BHI study found the WHD’s inaccurate measurement of wages has several principal consequences for construction wages and costs:
• The WHD methods inflate wages by an average of 22%.
• The WHD methods inflate construction costs on projects subject to the DBA by 9.91%.
• The WHD methods unnecessarily raise construction costs by a total of $8.6 billion per year on projects subject to the DBA.
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