Friday, October 14, 2005

The Davis-Bacon Act is something off topic for the Emirates, but of interest to students of labor economics and domestic U.S. politics - of which I am one.

Davis-Bacon requires construction projects funded with federal dollars must pay "prevailing wages" regardless of whether the construction firm employees unionized workers or not. Bush suspended the law in the areas affected by hurricane Katrina. Bush Senior had suspended Davis-Bacon indefinitely following Hurricane Andrew, but the Clinton lifted that suspension.

Mickey Kaus of Slate has been having some fun with this topic here, here, and here. Especially nice is the way he has marshalled comments from folks with direct knowledge of the application of Davis-Bacon.

Democrats oppose the suspension. The irony is that effects of the act in New Orleans would be the same as those intended by Davis and Bacon back in 1927 whose motives were racial. The effect of the act is to discourage contractors from employing workers with low skills. In the case of New Orleans, the application of the act would favor out-of-state skilled labor to the detriment of less skilled local labor. Perhaps Democrats simply do not understand this simple economic result as well as Rep. Bacon did.



Anonymous Dubai - here we come! said...

First, let me say that I enjoy your blog - your interests and adherence to the "Chicago" school remind me of my b-school economics professor from Vlerick Management School: Harry Bowen.

Also, I will be moving from Belgium to Dubai in a few weeks and believe your posts and views to be essential preparatory reading.

Enough of that. Here is my two cents worth on this issue ...

As a former labor attorney in the US, I think that whether or not the Davis-Bacon Act is applicable is irrelevant in this case. The free market will dictate wages - as it should.

I lived in the hurricane ravaged Caribbean (St. Thomas, USVI) in the mid-1990's. Although there was sufficient housing stock in "paradise", workers were in short supply. Most unskilled laborers made $20 per hour while those with carpentry and other skills made closer to $40 per hour. And that was in 1995!

For most construction companies (my clients), the Davis-Bacon Act was not even on the radar screen.

I lived in New Orleans for 6 years and recently spoke to a friend of mine who works with the constructon industry. I was not surprised to learn that there was a shortage of workers, both unskilled and skilled, no matter what the salary and housing arrangements. Numerous articles from local and national news outlets have reported similar stories.

Focusing on Davis-Bacon is just another example of the Democrats and Republicans putting "form ahead of substance" by pandering to their respective bases for political gain.

The reality for the next year or two is that most workers in these projects will make much more than the prevailing wage.

4:00 PM  

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