The number of jobs available at union rates in private construction has declined because of the high levels rates have reached. The wage rates extorted on Federal projects compensate, in part, for this decline. Union members are taking more and more nonunion jobs to offset the decreasing employment opportunities. In many areas where union rates have reached the eight and nine dollar level, members are working on nonunion jobs at four to five dollars an hour when no union jobs are available. For many types of construction in many centers, only union members at union rates are used even though their financing is not Federal or Federally assisted. As costs have been forced up, the result is the cancellation of projects which could serve their communities well, but inordinately high costs make them impossible. If there were no Davis-Bacon program forcing the payment of union rates on Federal projects, rates would not have been pushed to the levels which have killed many private projects. Unemployment in the construction trades would not have reached its current level. Current spending for construction is at near record levels, but current employment is not. Eleven percent of construction workers are unemployed. Unions, with Davis-Bacon incentives, have over-priced their members to the point where construction dollars buy so little that record spending does not result in record employment. 80-741 O 72 - 27 DAVIS-BACON ACT The Economics of Prevailing Wage Laws JOHN P. GOULD AMERICAN ENTERPRISE INSTITUTE 1150 17th Street, N.W., Washington, D. C. 20036 John P. Gould is associate professor of business economics at the Special Analysis Number 15, November 1971 Price $3.00 per copy © 1971 by American Enterprise Institute for Public Policy Research, Washington, D.C. granted when due acknowledgment is made. Library of Congress Catalog Card No. L.C. 70-185048 INTRODUCTION THE DAVIS-BACON ACT Contents Wage Differentials-A Brief Digression Other Federal Laws Requiring Davis-Bacon Prevailing Wage ADMINISTRATION OF THE DAVIS-BACON ACT ... Procedure for Predetermination of Wage Rates Professor Gujarati's Study Summary ... EFFECTS ON WAGES The Measurement of the Effect of Prevailing Wage Laws on SUMMARY APPENDIXES A. An Algebraic Model of the Effects of Prevailing Wage Laws C. Davis-Bacon Act (as amended) 1 3 35 6 9 9 10 11 15 18 21 23 27 31 37 41 |