David-Bacon: Jim Crow's Last Stand; J. Frantz

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. John Frantz is a law student at Harvard Univer sity in Cambridge, Massachusetts. The Act was passed in order to prevent non-unionized black and immigrant laborers from competing with unionized white work ers. 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 op portunities of low-income individuals in a number of ways. Minority contracting firms are often small and non-unionized, and can not affordto paythe "prevailing wage." The Act also requires contractors to pay un skilled 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 con struction industry for unskilled or low skilled workers. This is especially harmful to minorities because work in the construc tion industry pays extraordinarily well com pared to that for other entry-level positions, and could otherwise provide plentiful op portunities for low-income individuals to enter the economic mainstream. In November 1993, the Institute for Jus tice, 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 pro fession free from arbitrary government regulation. 66 The History of the Davis-Bacon Act Prior to the enactment of the Davis-Bacon Act, the construction industry afforded tre mendous opportunities to blacks, especially in the South. In at least six southern cities, more than 80 percent of unskilled construc tion workers were black. Blacks also rep resented a disproportionate number of un skilled 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 seri ously threatened by competition from blacks, and favored any attempt to restrict it.1 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 sta tus 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 dis trict by an Alabama contractor which em ployed only black laborers. Representative William Upshaw, under standing 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. ,,2 Over the next four years, Bacon submitted 13 more bills to regulate labor on federal public works con tracts. 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 67 $5,000 pay their employees the' 'prevailing wage." The law was amended in 1935, reducing the minimum to $2,000 and dele gating the power of determining the "pre vailing 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 com plaints in recent months about southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South.,,3 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. ,,4 Other derogatory comments were made about the use of "cheap labor,"

"cheap, imported labor," "transient la bor," and "unattached migratory work men. ,,5 While supporters of the Act in tended to disadvantage immigrant workers of all races, they were particularly con cerned 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 com petitor to enter into the field of fair compe tition. ,,6 This rhetoric of "fairness" domi nates much of the contemporary debate over Davis-Bacon, as well. Two important modifications have re cently been made in the way that the Davis Bacon Act is enforced. In 1982, the Depart ment of Labor altered the basis for determining the prevailing wage, deciding to equate the union wage with the "prevailing 68 THE FREEMAN. FEBRUARY 1994 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 at tempted 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 pre vented the Department from enforcing it. Moreover, labor unions are now pressuring Congress and the Clinton Administration to repeal the changes. Similarly, while Presi dent 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 surpris ingly, have failed to attain majority support.

Effects of the Davis-Bacon Act The Davis-Bacon Act imposes tremen dous 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 appren tices. 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. 7 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 unem ployment rates were similar prior to passage ofthe Davis-BaconAct, they beganto diverge afterwards. This problem persists today. In the first quarter of 1992, the black unemploy ment rate was 14.2percent, even though the overall national rate was only 7.9 percent. The racial difference in unemployment rates is especially pronounced in the con struction 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. 8 Despite recent racial progress, Davis Bacon continues to inhibit minority eco nomic progress in several ways. For in stance, 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. 9 Moreover, unskilled workers must be paid the same wage as a skilledworker, forcingthe contractor to pay laborers considerably more than the market value of their work. For example, in Philadelphia, electricians work ing 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 contrac tors have no incentive to hire unskilled workers. Ralph C. Thomas, former execu tive director of the National Association of Minority Contractors, stated that a minority contractor who acquires a Davis-Bacon con tract has "no choice but to hire skilledtradesDAVIS-BACON: JIM CROW'S LAST STAND 69 men, the majority of which are of the major ity." As a result, Thomas said, "Davis-Bacon closes the door in such activity in an indus try most capable of employing the largest numbers of minorities. ,,10 The paperwork a contractor must fill out pursuant to Davis-Bacon contracts also dis criminates 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. Ironi cally this is one problem Davis-Bacon was intended to prevent. Bacon said during de bate 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. ,,11 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 Penn sylvania 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 work ers in other parts of the city. As a result, rural and inner-city contrac tors 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 un skilled minority workers from those avail able jobs. In contrast is the situation in South Florida and coastal Louisiana, where the suspension of Davis-Bacon created 5,000 to 11,000jobs. 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 De velopment, gained control of a pair of di lapidated 200-unit buildings in Tulsa, Okla homa, he intended to hire many of the building's unemployed residents to help re store 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 hir ing 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 prob lems. Davis-Bacon requires him to pay car penters (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." 12 Conclusion The constitutional challenge to Davis Bacon is a cornerstone of the Institute for Justice's program to restore economic lib erty as a fundamental civil right. The Insti70 THE FREEMAN • FEBRUARY 1994 tute 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 pro cess clause. The Institute for Justice has brought together a unique coalition of plain tiffs to challenge the law. Complainants range from individual minority contractors, who have either lost opportunities to suc cessfully 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 con struction industry for more than six decades. 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 pur suing 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. D 1. Johnson, "Negro Workers and the Unions," The Sur vey, 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/or Laborers and Mechanics on Public Buildings ofthe 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 Enter prise Institute, 1980), p. 62. 10. Testimony by National Association of Minority Con tractors 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. Why Does Davis-Bacon Persist? T he harmful effects of the Davis-Bacon Act do not seem to impair its popularity. They are interpreted away and placed on the door steps of capitalism. The American public does not suspect the Davis Bacon Act, the Norris-LaGuardia Act, or the Smoot-Hawley TariffAct of having played an ominous role in the Great Depression. It lays the blame instead on mysterious failings of the private-property order and the profit motive. It does not suspect labor legislation of causing unemployment, especially among minorities. Instead, the public is persuaded that white middle-class racism, especially among employ ers, is responsible for the unemployment plight.

To raise the income of labor by legislative fiat or union coercion is the very essence of interventionism. In the eyes of the American public, to raise wages is virtue, to take from employers is morality. In the world of reality, however, inexorable economic principles contradict such notions and point up the inevitable consequences of policies based on these notions. In economic life, principle must prevail in the end. -HANS F. SENNHOLZ IDEAS ON LIBERTY $ THEFREEMAN IDEASON LIBERTY FEDERAL TRANSIT SUBSIDIES: How GOVERNMENT INVESTMENT HARMS THE U.S. ECONOMY by John Semmens I t has been asserted by some that part of what is needed to revitalize the U.S. economy is more government investment. There is, of course, a superficial plausibility to this assertion. Every dollar the govern ment spends becomes somebody's income. The people working on government-funded projects do have jobs. The purchases gov ernment makes result in revenues for some businesses. All of this is formalized in the Gross National Product (GNP) wherein ev ery monetary transaction that takes place is tallied as one measure of the economy's health.