The phrase, “good-paying jobs,” seems to reverberate throughout the entirety of President Joe Biden’s industrial policy.
With each federally funded project, the White House thinks it can create the infrastructure needed to provide, in abundance, such critical outputs as high-speed internet, clean drinking water, or cutting-edge semiconductors.
At the same time, they claim these projects will create jobs with salaries that pay well above market rates. This ignores, however, the harsh realities of tradeoffs and opportunity costs. While this may be evident to anybody who understands basic economics, the problem appears entirely foreign to the president. Siphoning dollars from finite federal grants to compensate workers at artificially high rates will necessarily shrink the output of the Biden administration’s infrastructure projects.
The Department of Labor (DOL) has doubled down on the administration’s profligate, pro-union agenda. In August, it revised the regulations governing the Davis-Bacon Act (DBA), a 1931 statute that guarantees wages and fringe benefits that equate to “prevailing” local compensation rates to contractors who work on most federally funded projects. Fortunately, however, Republican Pennsylvania Rep. Lloyd Smucker has introduced a resolution under the Congressional Review Act to block Biden’s pro-union pandering.
“The Davis-Bacon Act and now more than 70 active Related Acts collectively apply to an estimated $217 billion in Federal and federally assisted construction spending per year and provide minimum wage rates for an estimated 1.2 million U.S. construction workers,” the DOL writes in its final rule. These figures will almost surely rise steeply as Washington disburses funds from such laws as the bipartisan infrastructure package of 2021, the CHIPS Act, and the Inflation Reduction Act.
Until the 1980s, the federal government determined a region’s “prevailing wage” through a three-part process. First, it ascertained whether 50 percent of workers in the relevant occupation and locality receive a single rate. If not, it did the same, but with a 30-percent threshold. Absent that, it calculated a weighted average. President Ronald Reagan’s DOL excised the 30-percent rule, but Biden’s has reinstated it.
This change will cost the public dearly — particularly now, a time when “infrastructure week” seems never to end. According to the Bureau of Labor Statistics, in 2022, unionized workers’ median weekly income exceeded that of non-union workers by 18 percent. “The Biden administration estimated that there was $262 billion in federal construction contract spending in Fiscal Year 2021,” writes Sean Higgins, a research fellow at the Competitive Enterprise Institute. “Reverting to the Davis Bacon’s Act’s 30 percent standard would likely raise those costs by approximately $20 billion, a substantial additional burden to taxpayers.”
Besides its fiscal imprudence, the 30-percent rule’s revivification will unfairly shield union members from their non-unionized competition. Unionized workers comprise 30 percent of workforce in a given industry and locality more often than they comprise a full half. So, in localities where unionized rates now make up between 30 percent and 50 percent of all rates, the new rule likely sets those rates as a wage floor for DBA-regulated federally funded projects.
Unions employ collective bargaining to exert upward pressure on wages. Conversely, to tether union demands to market realities, workers must retain their ability to decline union membership and to undercut unions’ demands absent privately and voluntarily negotiated exclusivity contracts. Preventing such undercutting forecloses the competitive threats posed by unions’ perennial nemesis — free labor markets. It constitutes little more than a nepotistic handout to Democrats’ Big Labor allies. It fortifies unions’ power to cut out workers who, by either choice or circumstance, lack membership.
The Davis-Bacon Act’s anticompetitive — and even racist — origins expose its exclusionary workings fully. Many of its advocates, including the titular Rep. Robert Bacon of New York, sought to preclude black Americans from outcompeting their white countrymen in labor markets. Such pernicious reasoning drove early support for minimum-wage laws as well.
The law succeeded. “In 1931, the unemployment rate of blacks was approximately the same as the rate for the general population,” reports columnist George Will. “Davis-Bacon is one reason the rate for blacks began to deviate adversely.”
The racial undertones of Davis-Bacon may have subsided in the present day. Nonetheless, the law persists in ensconcing union workers to the detriment of most others. Times change, but the laws of economics remain static, no matter what kind of intentions politicians pave the regulatory roads with.
To justify its selectively granted largess, the White House says it will ensure “investments in America lead to jobs where construction workers are paid fairly.” Sensible observers ought to dispense with the pretense that bureaucrats can determine a fixed, objective metric of “fair” compensation. As an economic matter, employers and workers negotiate wages and benefits based on the value added by the position in question, workforce supply and demand, and other factors, all of which vary greatly.
The Biden administration’s emotionally charged appeals cannot slip the bonds of economic reality. The president’s labor policies will disadvantage non-union workers unfairly and produce less infrastructure. He may manage to convince some voters otherwise, but the laws that govern scarcity, tradeoffs, and competition will remain unmoved.
David B. McGarry is a policy analyst at the Taxpayers Protection Alliance.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.