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Topics: Labor Unions

Math mistakes lead government to pay contractors up to 3 times market rate under Davis-Bacon

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Map showing wages for this occupation. Watch while it cycles or toggle to select one.
Percent federal contractor floor pay exceeds median local wages

Feds mandating companies pay above market rate

The minimum wage federal contractors must pay in each region vs. the median salary for that job there
Source: Washington Examiner analysis of Bureau of Labor Statistics Occupational Employment Statistics and WDOL.gov Service Contract Act data. Watchdog,Labor unions,Jobs,Labor,Economy,Luke Rosiak,Accountability,Spending,Minimum Wage,BLS,Logan Porter

Construction workers at companies doing work for the federal government are paid as much as three times what their peers outside of government get for the same work, a Washington Examiner review of federal statistics found.

Pipefitters in Laredo, Texas, for example, can usually expect to make around $11.47 hourly, but if working on a federal contract, they must be paid at least $36.49, plus benefits.

Window installers in New York City make $18.87 an hour in the market -- that's the median salary, including industry veterans -- yet the government requires those doing that work for it in the New York area to be paid at least $42, even if they're inexperienced.

While tradesmen known as lathers in Philadelphia usually make $19.26 an hour, the law requires federal contractors to be paid $39.90 with an additional $25 an hour in fringe benefits.

Advocates for workers might cheer higher wages for anyone as a good thing, but the disparity between the market and Uncle Sam isn’t the result of an intentional act of generosity by lawmakers, but rather a series of math errors by bureaucrats.

That the gap was never intended is evident in the very phrase lawmakers used in the bill that set up the system: It tasked Labor Department administrators with pegging the federal minimum to the “prevailing wage.”

That’s essentially another way of saying the median wage for that occupation locally, and the comparison shows that thanks to a flawed methodology, the so-called “prevailing” wage is not even close to the one that’s actually prevalent.

Under the Davis-Bacon Act of 1931, the Labor Department establishes an occupational “prevailing wage” by sending surveys to employers.

That means they duplicate work that their own colleagues within the Labor Department, at the Bureau of Labor Statistics, are devoted to full-time, even though BLS has expertise in generating the most accurate numbers available anywhere.

The BLS data is the source for median earnings that the Washington Examiner consulted to find how the Davis-Bacon “minimum wage” for contractors compared to what people made elsewhere.

In their half-hearted efforts to determine what people make, Davis-Bacon administrators send paper survey forms to local employers and unions.

But response rates are abysmal, Heritage Foundation labor researcher James Sherk found, with three-quarters of wage determinations based on less than 25 responses, and 1 in 5 based on five or fewer -- a sample far too small to be meaningful.

In recent years, response to the voluntary surveys was so low that Labor changed the minimum required to issue a wage determination from six employees to only three.

Employers have little to no incentive to respond to the surveys; the few that do choose to respond have an interest in steering the wages in a particular direction and “are disproportionately represented by large labor unions,” Sherk said.

Only 14 percent of construction workers are represented by unions, yet almost two-thirds of wage determinations issued by the government across the country use the union rate, a 2011 Government Accountability Office report shows.

That’s why bricklayers in the Washington metropolitan area average an hourly wage of $19.84 whereas their contracted counterparts make $31.85 or more.

Recently released Census Bureau data put public construction in 2013 at $271 billion. The Congressional Budget Office estimated last year that repealing Davis-Bacon could save the federal government roughly $40 billion over 10 years.

The nonpartisan budget office noted that the act “distorts the market for construction workers” due to the disparity between the prevailing wage and regular wages.

Government and independent researchers have been warning of shortcomings of Davis-Bacon for decades.

And a previous Washington Examiner analysis detailed similar differences in pay for service for government contractors in non-construction positions, under a counterpart to Davis-Bacon known as the Service Contract Act.

As early as 1979 the GAO, a research arm of Congress, released a report titled “The Davis-Bacon Act Should Be Repealed.”

The report cited “significant changes in economic conditions” since the Great Depression, when the act was passed, and “unnecessary construction and administrative costs.”

Independent researcher Armand Thieblot has been studying the law since 1973.

“It was a bad law when it was passed, and it’s a bad law now,” he said. “There are so many anomalies in the surveys I have examined, I simply can’t describe it as any kind of scientific or fair process.”

Multiple audits from the GAO and the Department of Labor's own inspector general have discovered error rates of up to 100 percent in the wage determinations.

The government contends that the wage rates are necessary to prevent contractors from taking advantage of workers.

Thieblot dismissed this argument. “The market is always going to require higher pay for greater skill ... It’s up to the individual contractor or employer to discover that higher rate.”

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