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The Davis-Bacon Act has been a subject of continuing controversy in the Congress. This paper, prepared at the request of the Subcommittee on Labor of the Senate Committee on Labor and Human Resources, describes the act and its effects on wages, federal construction costs, inflation, and employment. In addition, it examines options for modifying the Davis-Bacon Act and presents estimates of their impact on the federal budget.

This study was written by Steven H. Sheingold of the CBO's Human Resources and Community Development Division, under the direction of Nancy M. Gordon and Martin D. Levine. Many persons provided valuable technical and critical contributions, including Robert S. Goldfarb, Richard Hendrix, G. Brockwel Heylin, Michael O. Roush, 3ames Schlicht, and Terry Yellig. Howard Levine provided computer assistance. Johanna Zacharias edited the manuscript. Jill Bury typed the several drafts and prepared the paper for publication.

In accordance with CBO's mandate to provide objective and impartial analysis, this paper contains no recommendations.
 

Alice M. Rivlin
Director
July 1983
 
 

SUMMARY

CHAPTER I. INTRODUCTION

• Plan of the Paper
• The Aims and Scope of Davis-Bacon
• The Issues
• Proposed Davis-Bacon Legislation

CHAPTER II. THE CONSTRUCTION LABOR MARKET

• General Characteristics
• Union and Nonunion Construction
• Unemployment, Wages, and Earnings
• Skills and Training

CHAPTER III. EFFECTS OF DAVIS-BACON ON FEDERAL CONSTRUCTION COSTS AND ON THE ECONOMY

• Administrative Procedures for Davis-Bacon
• Effects of the Act on Federal Construction Costs
• Effects of the Act on the Economy

CHAPTER IV. OPTIONS FOR CONGRESSIONAL ACTION ON THE DAVIS-BACON ACT

• Repeal of Davis-Bacon
• Raising the Dollar Threshold Level
• Changing the Definition of Prevailing Wage
• Allowing Expanded Use of Helpers and Trainees
• Reducing the Amount of Required Compliance Activities
• Using a Combination of Options

APPENDIX. ESTIMATES OF THE EFFECT OF DAVIS-BACON WAGE DETERMINATIONS
 

TABLES
1.	Distribution of Davis-Bacon Contracts by Dollar Values of Projects, October 1981-June 1982
2.	Average Annual Earnings by Major Labor Sector and Numbers of Weeks Worked Per Year, 1981
3.	Projected Federal Savings from Changes to the Davis-Bacon Act, Fiscal Years 1984-1988
FIGURE
1.	Unemployment in the Construction Industry Compared to Nationwide Unemployment, 1970 to Mid-1983

 

The Davis-Bacon Act, passed during the Depression to protect the living standards of construction workers, has recently become a subject of heated legislative debate and court dispute. The principal charges against Davis-Bacon are that it causes construction workers on federal projects to be paid at needlessly high rates, raises construction costs in general, fuels inflation, and limits employment opportunities in the industry. Such criticisms have prompted various proposals to amend or repeal Davis-Bacon, that could reduce federal spending by up to $5 billion over the coming five years. Advocates of retaining the act, either intact or modified, cite benefits it confers--namely, protecting construction workers against wage cutting by contractors, adding a measure of stability to an inherently volatile labor market, fostering the recruitment and training of skilled labor, and assuring high building quality. Thus, an assessment of costs against benefits must underlie any possible legislative action on Davis-Bacon.

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