Modifying the Davis-Bacon Act: Implications for the Labor Market and the Federal Budget

Abstract

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 corning 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.