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Tuesday, April 24, 2012

The Davis-Bacon Act and Changes in Prevailing Wage Rates, 2000 to 2008

Gerald Mayer
Analyst in Labor Policy

The Davis-Bacon Act requires employers to pay workers at least the locally prevailing wage and fringe benefits on federal construction projects of more than $2,000. These wages and benefits are the minimum that employers must pay workers. In order to hire and retain workers, employers may pay more than the minimum amounts. Issues for Congress include the effect of the Davis- Bacon Act on labor costs in federal construction and the earnings of construction workers and their families. Other concerns include the administration and enforcement of the act.

The U.S. Department of Labor (DOL) publishes Davis-Bacon prevailing wages for four types of construction: residential, building, highway, and heavy construction. A comparison of Davis- Bacon prevailing wages in these four types of construction with average hourly wages from the Occupational Employment Statistics (OES) survey in 12 states shows the following:

         In 2000, 67.5% of Davis-Bacon prevailing wage rates (141 of 209) were either the same as or higher than OES average hourly wages. In 2000, OES wages are available for metropolitan areas only. 
         In 2008, if Davis-Bacon prevailing wages are compared to OES average hourly wages in metropolitan areas only, 62.4% of Davis-Bacon wages (189 of 303, where nonmetropolitan areas are excluded) were higher than OES wages. 
         Differences in Davis-Bacon prevailing wages and OES average hourly wages vary by type of construction. In 2008, in building, highway, and heavy construction, 66.7%, 63.6%, and 59.7%, respectively, of Davis-Bacon wages were higher than OES wages. By contrast, in residential construction, 19.0% of Davis-Bacon wages were higher than OES wages.
These findings indicate that Davis-Bacon prevailing wages are generally higher than average OES hourly wages in three of the four types of construction for which DOL publishes wage determinations. On the other hand, the findings suggest that from 2000 to 2008 the gap between Davis-Bacon and OES wages may have narrowed. The gap between Davis-Bacon OES wages may have narrowed for several reasons. First, from 2000 to 2008, 38.0% (157 of 413) of prevailing wages examined for this report did not increase or were raised because of a higher federal minimum wage. Second, research suggests that the wages of union workers are higher than the wages of nonunion workers, but that the gap may have narrowed. Therefore, to the extent that Davis-Bacon wages are union wages, the difference between Davis-Bacon and OES wages may have narrowed. Third, union membership in the construction industry has declined (from 18.3% to 15.6% between 2000 and 2008), which may have lowered the share of Davis-Bacon wages that are based on collective bargaining agreements.

If the Davis-Bacon Act causes contractors to pay wages that are higher than they would otherwise pay, Davis-Bacon may raise labor costs on federal construction projects. If these higher costs are not offset by greater labor productivity, better work quality, or improved timeliness in completing construction projects, Davis-Bacon likely raises the cost of federal construction. Inputs other than labor go into the costs of construction (e.g., land and materials). But, if the gap between Davis- Bacon and overall average hourly wages has narrowed, the effect of the Davis-Bacon Act on labor costs on federal construction projects may have diminished.

Finally, the average hourly wage for workers in many construction occupations appears to have fallen relative to the average hourly wage for all occupations. This trend could also affect labor costs on federal construction projects.

Date of Report:
March 30, 2012
Number of Pages:
Order Number: R
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