Davis-Bacon at ninety, the 1931 wage law that raises the price of a bridge

Suppose the county wants to build a bridge, and suppose two contractors bid on it. One can do the job for less because her crew is smaller, her equipment is newer and her workers have agreed to wages that match what they would earn anywhere else in the region. The other bids higher. Under federal law the first contractor may be forced to raise her pay scale to a number set by a government survey before she is allowed to touch a federally funded job. Then she bids higher too, and the taxpayer pays the difference.

That is the Davis-Bacon Act in a paragraph. It is more than ninety years old, it covers an enormous amount of public construction, and almost nobody outside the building trades has read it. Let us fix that.

What the law says

The Davis-Bacon Act was signed on March 3, 1931, by President Herbert Hoover. It is named for its sponsors, Senator James J. Davis of Pennsylvania and Representative Robert L. Bacon of New York. The core of it is a single promise. Contractors on federal construction contracts above a small dollar threshold, which the statute first set at five thousand dollars, cut to two thousand in 1935 and never raised since, must pay the laborers and mechanics they employ no less than "prevailing wages" for the type of work in the locality.

The statute covers contracts for the construction, alteration or repair, including painting and decorating, of public buildings and public works. That language reaches far beyond a post office. Congress has added dozens of programs over the decades, known as the "related acts", that attach Davis-Bacon wage rules to money flowing out of federal highway, housing, transit and other grants to states and cities. So when a state builds a road with federal dollars, the federal wage rule follows the dollars across the state line.

Two words deserve a closer look. "Prevailing" sounds like a market word, as if the law merely asked contractors to match what the market pays. And "locality" sounds like a small place. Both words do more work than they seem to.

How a prevailing wage gets set

The Labor Department's Wage and Hour Division publishes the numbers, called wage determinations, for each type of construction in each county. To make them it surveys contractors and workers about what was paid on recent projects. A wage rate for a job classification, say an electrician or a laborer, is the one paid to the majority of workers in that classification in the area. If no rate is paid to a majority, the Department uses a "30 percent rule" (dropped in 1982 and restored by a rule that took effect in 2023, so check the current regulation): a rate counts as prevailing if at least thirty percent of the workers in the classification receive it, and if no rate reaches thirty percent the Department uses a weighted average.

Notice what that does. A county where thirty percent of electricians on a recent set of projects earned a union rate, and the rest earned various lower rates, will see the union rate declared the prevailing one, because it is the single most common rate. The lower rates that most workers earned do not prevail, they merely add up to more than thirty. In a place where unions are strong, "prevailing" tends to mean union scale. In a place where unions are weak, the survey has fewer responses, and the answer can be a number that does not match any real job site.

I do not say that the Labor Department is fixing the numbers. I say that survey-based wage setting has predictable weaknesses: voluntary responses, small samples, old data, and a rule that picks one rate when many are paid. Critics from several directions have said so for decades. The government's own auditors have flagged problems with the accuracy and timeliness of the surveys. If you want the detail, the reports of the Government Accountability Office are public and worth reading.

Why a wage law passed in 1931

Context matters. In 1931 the country was sliding into the Depression. Contractors in some areas were bringing in workers from other parts of the country who would work for less, and local workers and local contractors complained that they were being undercut on federal projects. Representative Bacon's own district had a federal veterans' hospital under construction, and the contractor had brought in a work crew from another state. The complaint that followed turned the incident into a bill.

The honest version of the case for the law says: federal money should not be used to break down local wages in the middle of a depression. That argument was not made in bad faith, and I will return to it.

But the debate also had a darker edge, and it would be dishonest to leave it out. In the House hearings and floor debate of 1931 some supporters spoke in plainly racial terms about the workers who were being brought in, and who were Black. Representative Miles Allgood of Alabama, speaking in favor of the bill, complained about contractors who brought in cheap Black labor from other states, in the vocabulary of his day, and others made similar remarks. You can read the Congressional Record yourself. The record shows that, whatever else Davis-Bacon was, part of the motive of some of its backers was to keep Black laborers from competing for government work at lower wages.

I want to be careful here, as the economists who have written on this are careful. Historians do not claim that every supporter shared that motive, or that the whole of the law rested on it. The claim is narrower and well documented: some of the words used in the 1931 debate were racial, and a wage floor that prices out the lower bidder has always worked, in practice, against those who were most likely to be shut out of the trades. That is part of the same history as the minimum wage; see the minimum wage's 1938 birth and the workers it was meant to shut out.

What it costs

If a rule forces wages above what a contractor would otherwise pay, the cost of the finished job goes up. That much is arithmetic. The argument is about how much. Estimates differ by who is doing the counting and what is assumed: how many workers, what the gap between prevailing and market wages is, how much of the labor bill is wages as opposed to materials, how contractors respond.

The Congressional Budget Office has examined the question. In its periodic reports of options for reducing the deficit, it has laid out the savings from repealing the Act, and the estimate changes from one edition to the next. I will not quote a figure here that I cannot verify to the dollar. Read the budget options volume for the year you are reading, and see Read a CBO cost estimate yourself before you believe the headline for how to read a CBO estimate with a skeptic's eye. The direction of the estimate is not in dispute: repeal would lower the cost of federally funded construction and so lower federal spending. What the dispute turns on is the size.

A worked example, labeled hypothetical, shows the mechanism. Suppose a road project has a labor bill of four million dollars at market wages. If the prevailing-wage determination raises the wages of its workers by ten percent on average, the labor bill rises to 4,400,000 dollars, a gain of four hundred thousand. That is the contractor's extra cost, and it is passed to the public in the price. Whether the real number is five percent or twenty depends on the county, the trade and the year. But there is no county where the effect is a reduction.

There is a second cost that does not show up in a line item. A rule that makes federal jobs expensive for small, non-union contractors, who must keep a second set of payroll records, classify every worker by trade and file weekly certified payrolls, steers the work toward the large firms that can absorb that paperwork. That sits in the same family as the pattern described in big companies love the regulations their small rivals cannot afford.

The steelman: it protects quality and local workers

Here is the best case for the law, stated so that its defenders would accept it.

The Act protects workers from a race to the bottom, the argument goes. Without it, contractors would win federal jobs by cutting wages, which means hiring less-skilled, lower-paid crews, and the quality of public works would suffer. Higher wages draw experienced workers and fund apprenticeship programs, which means safer sites and sturdier bridges. And the money circulates locally: well-paid workers spend in the community that is paying for the project. When Congress spends taxpayer money, the argument concludes, it has an interest in not subsidizing the undercutting of local labor markets.

The rebuttal, in numbered points

That is a respectable case. Here is why I do not think it survives.

1. A wage floor is not a quality guarantee. A contractor who underpays a good crew loses that crew, and a contractor who overpays a mediocre one does not gain skill. The things that make a bridge sound are engineering, inspection and the contract's performance terms, and those can be enforced directly. The Act sets none of them. It sets a price for labor, and pays nothing for a better result.

1. The "race to the bottom" is a race the contractor has to win in a bidding process. The government can write specifications, require bonds, check references and refuse low bids from firms with bad records. It already does. The prevailing-wage rule substitutes a government survey for those tools.

1. The beneficiaries are not who we are told. The people who gain most from the rule are workers in the trades that already have the strongest bargaining position. The people who lose are taxpayers, non-union contractors, and workers who would have been hired at lower rates, a group that includes many young people and many of the minority workers whom the 1931 debate was meant to shut out.

1. Higher costs mean fewer projects. If a road costs ten percent more to build, a fixed budget builds roughly nine percent fewer roads. That is arithmetic as well: dividing the same sum by a price one-tenth higher yields about ninety-one percent of the output. Fewer bridges, fewer school repairs and fewer jobs follow, and those lost jobs are union jobs too.

1. The government has suspended the Act when it mattered. President Nixon briefly suspended it in 1971, and President George W. Bush suspended it for the Gulf Coast after Hurricane Katrina in 2005 and then restored it about two months later. If a rule is so costly that a President is prepared to turn it off in an emergency, the honest inference is that it is costly in ordinary times too.

The Founding-era question: whose money, whose rule?

I said at the start that this is a law almost nobody has read, and there is a constitutional reason that it matters. The spending power, found in Article I, Section 8, authorizes Congress to "lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States". The government may attach conditions to its own contracts. A rule about wages on federal construction is, in one sense, only the government setting terms on what it buys.

But the more the Act is extended by the related acts to grants that pass through states and cities, the more it becomes a federal rule on local labor markets, set by a federal agency, enforced by federal investigators, applied to projects that belong to a state or a town. That is where a federalist should pause. Federalism Lets Fifty States Experiment, and the Constitution Planned It explains why the Founders wanted fifty different answers to questions like what a laborer should earn in Tulsa. Davis-Bacon replaces fifty answers with one process.

Reform without repeal

Repeal is the simple answer, and it would save money. If that is not on the table, a conservative reform agenda has plenty of room to work.

• Raise the two-thousand-dollar threshold, which has not moved since 1935. Dollars in 1935 bought many times what they buy now, so the threshold sweeps in small jobs it was never meant to reach.
• Rebuild the wage surveys so that they rely on verified payroll data and not voluntary responses, and publish the data so that anyone can check the result.
• Replace the thirty percent rule with a true majority rule or a median.
• Exempt small projects and allow states to opt out for their own grant-funded work.
• Count the cost of the Act in every project estimate, so that voters can see it.

Several versions of these proposals have been introduced in Congress over the years, and several states that once had their own prevailing-wage laws have repealed them. The records of those experiments are the place to look for the evidence on both sides of the debate.

Hold the tension honestly

I do not want to leave you with a cartoon. Skilled tradespeople are not villains. Many of the men and women in the building trades are the kind of independent, hard-working Americans conservatives rightly admire, and many of them are conservatives. The point is not that the building trades should earn less. It is that the government should not use the taxpayer's money to enforce a pay scale that a competitive bidding process would not set, and that a statute born in part from racial anxieties should not be treated as holy writ merely because it is old.

If a worker is worth the wage, the market and the contract will pay it. If the work is not worth the wage, the taxpayer should not be made to pretend otherwise.

The case in brief

1. The Davis-Bacon Act of 1931 requires contractors on federal construction to pay locally "prevailing" wages, which in practice are set by Labor Department surveys and often track union scale.
2. The law was passed in a depression, and its 1931 debate included explicitly racial arguments about out-of-state Black laborers, a documented part of its history.
3. It raises the cost of public construction, which means fewer roads, bridges and repairs for the same budget. The size of the effect is debated; its direction is not.
4. The best defense, that it protects quality and local workers, answers a problem that bidding rules, bonds and inspections already handle.
5. Reform is possible even without repeal: raise the threshold, fix the surveys, and let states opt out.

What you can do: look up the Davis-Bacon wage determination for your own county on the federal wage-determination website, compare it to what local workers actually earn, and ask your state legislators whether state-funded projects should follow the same rule.