Ditch this Jim Crow-era mandate that hurts minorities most

Congress passed a “prevailing wage” law in 1931 specifically intended to favor white workers and white-only labor unions over nonunionized and minority workers.

Jim Crow is long gone. But prevailing-wage laws, which restrict qualified businesses from competing for taxpayer-funded public-works projects unless they comply with a host of onerous requirements, are back with a vengeance.

More than half the states have adopted their own prevailing-wage measures affecting tens of millions, even though these laws have proven time and again to hurt workers, businesses and taxpayers — with the burdens falling disproportionately on minorities and small businesses.

It’s time to ditch these laws for good.

Prevailing-wage mandates generally require private contractors who bid on public-works projects to provide their employees wages and benefits based on complicated formulas the federal government produces.

These bureaucrat-generated formulas are often unrealistic and difficult to implement: If a general laborer happens to hammer a nail during the course of his workday, for example, the employer must document that task and pay him as a “carpenter,” at a rate up to three times his regular pay.

That’s nonsensical, but left-leaning state and local governments across the country don’t care.

Michigan Gov. Gretchen Whitmer signed legislation in March imposing a prevailing-wage mandate.

Illinois progressives are trying to force existing prevailing-wage requirements on public-works solar projects.

And in Arizona, the Phoenix and Tempe city councils recently considered (and in Phoenix’s case adopted) prevailing-wage measures.

Both city governments abandoned the mandates only after the Goldwater Institute (where I work) drew attention to their detrimental effects and the fact they violated state law. 

Among the worst offenders is New York, where a new law recently expanded the state’s prevailing-wage mandate into one of the nation’s most complicated and expansive — to the point that it even covers many private construction projects.

It’s not just about wages, either: These laws interpret mandatory employee “benefits” to include “apprenticeship programs,” which are notoriously used as union-recruitment tools.

Michigan Gov. Gretchen Whitmer signed a prevailing-wage bill in March.
Michigan Gov. Gretchen Whitmer signed a prevailing-wage bill in March.
Photo by Kevin Dietsch/Getty Images

So contractors are frequently forced to provide financial support to union-sponsored programs and trade schools, above and beyond any actual project-related costs.

What’s more, these mandates often come with stiff penalties even for minor infractions: Contractors who fall out of compliance face heavy fines, crippling lawsuits, legal fees and even prison.

These risks combined with meticulous record-keeping requirements, complex paperwork and other administrative hoops to jump through are burdens many contractors (particularly small ones) simply can’t afford to bear.

Many businesses — including some that already pay their workers well above market rate — are thus forced out of the market.

It’s yet another example of a government policy intended to “help” people having disastrous consequences.

Consider minimum-wage hikes: They’re supposed to boost pay for low-income workers, but in reality they lead to fewer jobs for those who need them most and fewer hours and benefits for those who do manage to stay employed.

But unlike minimum-wage laws, prevailing-wage mandates didn’t even come from good intentions.

These mandates have a troubling history of racism, anti-immigrant prejudice and government-backed favoritism toward politically connected unions.

That’s the real story behind the 1931 federal Davis-Bacon Act, which mandates wages and benefits on federally assisted construction projects nationwide.

It’s well documented that Congress passed the law to prioritize white workers and white-only unions over nonunionized, black and immigrant workers.

The bill’s supporters didn’t mince words: The congressional record leading up to the law’s enactment is full of derogatory references to “competition with white labor,” “cheap bootleg labor,” “large aggregation of Negro labor” and the like.

Union members and prevailing wage supporters in the Michigan Capitol building for the state's bill to be voted on.
Union members and prevailing wage supporters in the Michigan Capitol building for the state’s bill to be voted on.
Todd McInturf/Detroit News via AP

Indeed, research shows prevailing-wage laws disproportionately harm immigrants, younger workers, small businesses and woman- and veteran-owned businesses.

They also hurt taxpayers, who are left footing the bill for higher construction costs, and all residents, who must wait longer for public-works projects to be completed.

One recent study found prevailing-wage laws force taxpayers to shell out between 8.5% and 14.3% more for road-construction projects.

And the Congressional Budget Office calculated in 2016 that repealing federal prevailing-wage mandates could have saved taxpayers $13 billion over nine years.

Governments throughout the country should learn from these (and other) cautionary tales.

Prevailing-wage measures might sound nice on the surface, but they smuggle in high costs, bureaucratic red tape and favoritism toward large, politically connected unions — all under the guise of helping workers.

Don’t listen to the empty promises: Prevailing-wage laws hurt the very people they’re supposed to help.

John Thorpe is a staff attorney at the Goldwater Institute.

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