Davis-Bacon: Jim Crow's Last Stand
The ugliest and most disturbing events in American history have usually been linked with state- sponsored or sanctioned racism: Incidents of police brutality, symbolized by the Rodney King trials. Slavery. The Dred Scott decision. The post-Civil War Jim Crow laws. School segregation.
This article was originally published by the Foundation for Economic Education (FEE) in the Freeman, Vol.44 No. 2 (February 1994).
Today, however, most people like to believe that their government fairly represents the interests of everyone, regardless of race. Unfortunately, the states and the federal government still discriminate against blacks, but this state-sponsored racism has taken on more subtle forms. Thus while great strides have been made since the Jim Crow era, some relics remain. One of them is the Davis-Bacon Act.
Davis-Bacon, passed in 1931, requires private contractors to pay “prevailing wages” to employees on all construction projects receiving more than $2,000 in federal funding. The Secretary of Labor is charged with conducting surveys of a region’s wages and setting rates for up to 100 various classifications of workers. Most often, the “prevailing wage” corresponds to the union wage, especially in urban areas, where union membership tends to be higher. The Davis-Bacon Act covers approximately 20 percent of all construction projects in the United States and affects more than 25 percent of all construction workers in the nation at any given time.
The Act was passed in order to prevent non-unionized black and immigrant laborers from competing with unionized white workers. The discriminatory effects continue, as even today minorities tend to be vastly under-represented in highly unionized skilled trades, and over- represented in the pool of unskilled workers.
Davis-Bacon restricts the economic opportunities of low-income individuals in a number of ways. Minority contracting firms are often small and non-unionized, and cannot afford to pay the “prevailing wage.” The Act also requires contractors to pay unskilled laborers the prevailing wage for any job they perform, essentially forcing contractors to hire skilled tradesmen, selecting workers from a pool dominated by whites.
Thus, the Davis-Bacon Act constitutes a formidable barrier to entry into the construction industry for unskilled or low-skilled workers. This is especially harmful to minorities because work in the construction industry pays extraordinarily well compared to that for other entry-level positions, and could otherwise provide plentiful opportunities for low-income individuals to enter the economic mainstream.
In November 1993, the Institute for Justice, a Washington, D.C., based public-interest law firm, filed suit challenging Davis-Bacon constitutionality, as part of the Institute’s litigation program to help restore judicial protection of “economic liberty” the basic right to pursue a business or profession free from arbitrary government regulation.
The History of the Davis-Bacon Act
Prior to the enactment of the Davis-Bacon Act, the construction industry afforded tremendous opportunities to blacks, especially in the South. In at least six southern cities, more than 80 percent of unskilled construction workers were black. Blacks also represented a disproportionate number of unskilled construction workers in the North, and constituted a sizable portion of the skilled labor force in both parts of the country.
This was so despite the fact that most of the major construction unions excluded blacks, and that blacks faced widespread discrimination in occupational licensing and vocational training. These unions felt seriously threatened by competition from blacks, and favored any attempt to restrict it.
The co-author of the Act, Representative Robert Bacon, represented Long Island. Bacon was a racist who was concerned lest immigration upset the nation’s “racial status quo.” In 1927, he introduced H.R. 17069, “A Bill to Require Contractors and Subcontractors Engaged on Public Works of the United States to Comply With State Laws Relating to Hours of Labor and Wages of Employees on State Public Works.” This action was a response to the building of a Veterans’ Bureau Hospital in Bacon’s district by an Alabama contractor which employed only black laborers.
Representative William Upshaw, understanding the racial implications of Bacon’s proposal, stated: “You will not think that a southern man is more than human if he smiles over the fact of your reaction to that real problem you are confronted with in any community with a superabundance or large aggregation of negro labor.” Over the next four years, Bacon submitted 13 more bills to regulate labor on federal public works contracts. Finally, the bill submitted by Bacon and Senator James Davis was passed in 1931, at the height of the depression, with the support of the American Federation of Labor. The Act required that contractors working on federally funded projects over $5,000 pay their employees the “prevailing wage.” The law was amended in 1935, reducing the minimum to $2,000 and delegating the power of determining the “prevailing wage” to the Department of Labor. The Department’s regulations governing the determination of wages, remained basically unchanged for five decades and equated the prevailing wage with the union wage in any area that was at least 30 percent unionized. In practice, the “prevailing wage” was almost universally determined to be the same as the union wage.
The debate over Bacon’s bills betrayed the racial animus that motivated passage of the law. Representative John Cochran stated, “I have received numerous complaints in recent months about southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South.” Representative Clayton Algood similarly complained, “That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country.” Other derogatory comments were made about the use of “cheap labor,” “cheap, imported labor,” “transient labor,” and “unattached migratory workmen.” While supporters of the Act intended to disadvantage immigrant workers of all races, they were particularly concerned with inhibiting black employment.
Supporters of Davis-Bacon were also full of anti-capitalist rhetoric. Representative McCormack said of Davis-Bacon, “It will force the contractor who heretofore has used cheap, imported labor to submit bids based upon the ‘prevailing wage scale’ to those employed. It compels the unfair competitor to enter into the field of fair competition.”This rhetoric of “fairness” dominates much of the contemporary debate over Davis-Bacon, as well.
Two important modifications have recently been made in the way that the Davis-Bacon Act is enforced. In 1982, the Department of Labor altered the basis for determining the prevailing wage, deciding to equate the union wage with the “prevailing wage” only in places where the construction industry was 50 percent unionized. This change has had little effect on minority-owned firms’ ability to secure contracts because union membership tends to be much higher in urban areas, where large minority populations reside.
The Department of Labor has also attempted to alter its regulations to allow contractors to hire a limited number of unskilled “helpers” to work on Davis-Bacon projects for less than the prevailing wage. This change, which was to go into effect on February 4, 1991, would help to diminish some of the discriminatory effects of the Act, but Congress has so far prevented the Department from enforcing it. Moreover, labor unions are now pressuring Congress and the Clinton Administration to repeal the changes. Similarly, while President Bush suspended the Act in South Florida, coastal Louisiana, and Hawaii in October of 1992 following Hurricanes An drew and Iniki, President Clinton reversed course upon entering office.
Last year Senator Hank Brown (R-Col.) sponsored legislation to repeal the Davis-Bacon Act. A similar bill was introduced in the House by Representative Tom DeLay (R-Tex.). Both proposals have attracted congressional co-sponsors, but, not surprisingly, have failed to attain majority support.
Effects of the Davis-Bacon Act
The Davis-Bacon Act imposes tremendous economic and social costs—at least $1 billion in extra federal construction costs and $100 million in administrative expenses each year. Industry compliance costs total nearly $190 million per year. Repeal of the Act would also create an estimated 31,000 new construction jobs, most of which would go to members of minority groups.
Davis-Bacon’s impact on the ability of minorities to find work in the construction industry has been particularly devastating. The Department of Labor’s initial set of regulations did not recognize categories of unskilled workers except for union apprentices. As a result, contractors had to pay an unskilled worker who was not part of a union apprenticeship program as much as a skilled laborer, which almost completely excluded blacks from working on Davis-Bacon projects.This effectively foreclosed the only means by which unskilled blacks could learn the necessary skills to become skilled workers.
As a result, while black and white unemployment rates were similar prior to passage of the Davis-Bacon Act, they began to diverge afterwards. This problem persists today. In the first quarter of 1992, the black unemployment rate was 14.2 percent, even though the overall national rate was only 7.9 percent.
The racial difference in unemployment rates is especially pronounced in the construction industry. According to a recent study by the National Urban League, in the fourth quarter of 1992, 26.8 percent of all blacks involved in the construction industry were jobless compared to only 12.6 percent of white construction workers.
Despite recent racial progress, Davis-Bacon continues to inhibit minority economic progress in several ways. For instance, union apprenticeship programs, even if they no longer discriminate, still strictly limit the number of enrollees and impose arbitrary educational requirements on potential applicants, thereby excluding the most disadvantaged workers.
Moreover, unskilled workers must be paid the same wage as a skilled worker, forcing the contractor to pay laborers considerably more than the market value of their work. For example, in Philadelphia, electricians working on projects covered by the Davis-Bacon Act must be paid $37.97 per hour in wages and fringe benefits. The average wage of electricians working for private contractors on non-Davis-Bacon projects is $15.76 per hour, with some laborers working for as little as $10.50 per hour.
Thus, even minority, open-shop contractors have no incentive to hire unskilled workers. Ralph C. Thomas, former executive director of the National Association of Minority Contractors, stated that a minority contractor who acquires a Davis-Bacon contract has “no choice but to hire skilled tradesmen, the majority of which are of the majority.” As a result, Thomas said, “Davis-Bacon closes the door in such activity in an industry most capable of employing the largest numbers of minorities.”
The paperwork a contractor must fill out pursuant to Davis-Bacon contracts also discriminates against small, minority-owned firms. Many do not have personnel with the necessary expertise to complete the myriad forms and reports required.
As a result of all these factors, the Davis-Bacon Act prevents rural and inner-city laborers and contractors from working on projects in their own communities. Ironically this is one problem Davis-Bacon was intended to prevent. Bacon said during debate over the Act, “Members of Congress have been flooded with protests from all over the country that certain Federal con tractors on current jobs are bringing into local communities outside labor,” and “that the government is in league with contract practices that make it possible to further demoralize local labor conditions.”
Such a claim could easily be made today by inner-city and rural contractors. Yale Brozen, an economist at the University of Chicago, found that the “prevailing wage” for the Appalachian region of western Pennsylvania is set at the same level as that of Pittsburgh, despite the fact that the wages normally paid by the rural contractors are only half the levels of union contractors in Pittsburgh. The same is true of inner cities, where small, minority-owned, open-shop firms are forced to pay union wages when working on Davis-Bacon projects, because of the high concentration of unionized workers in other parts of the city.
As a result, rural and inner-city contractors are deterred from seeking Davis-Bacon contracts because they cannot afford to pay the higher wages to their employees and larger and more highly unionized firms are encouraged to seek out such contracts. The result makes it clear that the government is in fact “in league with contract practices” that “demoralize local labor conditions,” only now at the expense of minorities rather than whites.
The results of this practice were clearly demonstrated in Los Angeles. In the parts of the city where the riots occurred, the rate of unemployment for black workers is 27.6 percent. Despite an ample supply of local labor to help rebuild the city, Davis-Bacon has and continues to freeze out local unskilled minority workers from those available jobs. In contrast is the situation in South Florida and coastal Louisiana, where the suspension of Davis-Bacon created 5,000 to 11,000 jobs.
In addition to this statistical evidence, individuals involved in the construction and renovation of low-cost public housing have testified as to the disastrous effects of the Act. When Ralph L. Jones, president of a company that manages housing projects for the Department of Housing and Urban Development, gained control of a pair of dilapidated 200-unit buildings in Tulsa, Oklahoma, he intended to hire many of the building’s unemployed residents to help restore the property. But the Davis-Bacon Act required him to pay everyone working on the project union wages, forcing him to hire only skilled laborers, very few of whom were minorities.
Mary Nelson, director of Bethel New Life, Inc., a social service organization located in Chicago, has found that Davis-Bacon adds up to 25 percent to her total costs and frequently prevents her from hiring unskilled, low-income workers to work on projects renovating the public housing that they themselves live in. Elzie Higgin-bottom, builder of low-income housing in Chicago’s South Side, has had similar problems. Davis-Bacon requires him to pay carpenters (defined by the Act as someone who hammers in a nail) $23 per hour. As a result, he complained, “I’ve got to start out a guy at $16 per hour to find out if he knows how to dig a hole. I can’t do that.”
The constitutional challenge to Davis-Bacon is a cornerstone of the Institute for Justice’s program to restore economic liberty as a fundamental civil right. The Institute is challenging Davis-Bacon on the grounds that it is racially discriminatory, since it was passed to discriminate against blacks and immigrants, and as a result, violates the equal protection guarantee of the Fifth Amendment. The courts need only look to the legislative and administrative history of the law to determine that racial discrimination was among its purposes. The courts could also void the Davis-Bacon Act for impinging on the right of individuals to pursue employment opportunities, thereby violating the Fifth Amendment’s due process clause. The Institute for Justice has brought together a unique coalition of plaintiffs to challenge the law. Complainants range from individual minority contractors, who have either lost opportunities to successfully acquire government contracts or who have gone out of business altogether because of the application of Davis-Bacon, to resident-management corporations who because of the law have been unsuccessful in their attempts to involve public-housing residents in rebuilding programs at their own developments.
Borne of racial animus, the Davis-Bacon Act has undermined the efforts of economic outsiders to find employment in the construction industry for more than six de-cades. Given the influence of organized labor over Congress and the extent to which the Clinton administration’s support of NAFTA alienated this key constituency, it is highly unlikely that either branch will risk further undermining union support by pursuing reform or repeal of the Davis-Bacon Act. Thus, the only avenue that remains open is the judiciary. The courts should bury this relic of the Jim Crow era. 
1. Johnson, “Negro Workers and the Unions,” The Survey, April 15, 1928.
2. Ibid., p. 3.
3. Employment of Labor on Federal Construction Work, Hearings on H.R. 7995 and H.R. 9232 Before the House Committee on Labor, 71st Congress, 2nd Session, March 6, 1930, p. 26- 27.
4. Rates of Wages for Laborers and Mechanics on Public Buildings of the United States, 74 Congressional Record 6504, 6513, (1931).
5. Ibid., pp. 6515-6520.
6. Employment of Labor on Federal Construction Work, p. 6516.
7. Ibid., p. 4.
8. National Urban League, Quarterly Economic Report on the African American Worker, Fourth Quarter, 1992, Table 7 (presently unpublished).
9. John Gould and George Billingmayer, The Economics of the Davis-Bacon Act, (Washington, D.C.: American Enterprise Institute, 1980), p. 62.
10. Testimony by National Association of Minority Contractors before House Subcommittee on Labor Standards of the Committee on Education and Labor, Sept. 30, 1986, p. 3.
11. Employment of Labor on Federal Construction Work, p. 6511.
12. Patrick Barry, “Congress’s Deconstruction Theory,” The Washington Monthly, January, 1990, p. 11.
About The Author
John Frantz is a law student at Harvard University in Cambrifge, Massachusetts.The Foundation for Economic Education (FEE), one of the oldest free-market organizations in the United States, was founded in 1946 by Leonard E. Read to study and advance the freedom philosophy. FEE's mission is to offer the most consistent case for the "first principles" of freedom: the sanctity of private property, individual liberty, the rule of law, the free market, and the moral superiority of individual choice and responsibility over coercion.
The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.
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