r/neoliberal • u/SubjectSuggestion571 • 29m ago
Effortpost The Davis-Bacon Act’s Unintended Consequences: Prevailing Wages, Higher Costs, and Slower Building
TL;DR of the TL;DR: The Davis-Bacon Act is construction’s Jones Act – a self-inflicted wound that jacks up costs, kills competition, and makes it way harder to get stuff built.
TL;DR: The Davis-Bacon Act of 1931 was meant to ensure “prevailing” fair wages on federally funded construction projects. Nearly a century later, however, this well-intentioned law is driving up construction costs, adding red tape, and pricing out small contractors – ultimately undermining our ability to build affordable housing and critical infrastructure. This effortpost analyzes how the Act’s prevailing wage rules inflate labor costs (due to flawed Labor Department calculations), shares real-world case studies of cost overruns and delays, examines the heavy compliance burdens (especially on small businesses), and reviews data from across the political spectrum (Cato, Brookings, GAO, CBO, etc.). It concludes with ideas for modernizing or reforming Davis-Bacon to get more bang for the taxpayer’s buck while still paying workers fair wages. Grab a drink, this is a deep dive into one major reason why it’s so expensive to “build back better” in America.
Background: From Fair Wages to Heavy Burdens
The Davis-Bacon Act (DBA) is a New Deal-era law passed in 1931 that requires contractors on federal construction projects to pay their workers at least the “prevailing wage” for the area. In theory, this prevents government projects from undercutting local wage standards – a response to Depression-era fears of cheap labor driving down pay. At the time, Congress intended to ensure fair wages and prevent exploitive contractors from importing low-paid labor to underbid local firms. (Some historians also note racial motivations - the Act’s sponsors wanted to exclude African-American workers from undercutting white union labor - but the stated goal was protecting workers’ pay.)
Under Davis-Bacon, the U.S. Department of Labor (DOL) determines the prevailing wage (plus fringe benefits) for each trade and locality, and those rates are written into federal construction contracts. The law covers a wide range of projects, from highways and bridges to affordable housing built with federal funds, and applies to any construction contract over $2,000
Yes, a threshold of just $2,000, set in 1931, which today would be about $40,000 if adjusted for inflation meaning even the smallest of projects can trigger Davis-Bacon requirements. Contractors must pay workers at least the DOL-specified wage for their job classification, file extremely onerous weekly certified payroll reports, and comply with various labor standards or face penalties.
Fast forward to 2025: Davis-Bacon’s seemingly noble intent has run up against some harsh realities. Numerous audits and studies have found that the Labor Department’s prevailing wage calculations are often inaccurate and outdated, causing mandated wages to far exceed market rates. These inflated labor costs translate into higher price tags for public projects - meaning taxpayers pay more for less construction.
Compliance is bureaucracy-heavy, deterring many small businesses from bidding on public works. And real-world cases show Davis-Bacon requirements contributing to project delays, cost overruns, and even cancellations, from federal highways to low-income housing developments. In short, a law crafted in the era of Hoover and FDR is straining the ability of today’s America to build infrastructure and affordable housing efficiently.
Prevailing Wage Calculations: Methodology Flaws & Inflated Costs
At the heart of Davis-Bacon is the concept of the “prevailing wage." Ideally, the average wage paid to workers in a given trade and area. The problem is how those rates are determined. The Department of Labor’s Wage and Hour Division conducts surveys to set prevailing wages, but multiple investigations have found serious flaws in the methodology. The surveys are non-scientific and suffer low response rates, and they often end up reflecting union wage scales even when only a minority of the local workforce is unionized.
For example, a 2017 Heritage Foundation (I know, I know) analysis found DOL uses “unscientific and flawed methods,” including tiny, non-representative samples and even using data from entirely different counties or outdated surveys. Nearly half of the prevailing wage surveys were over a decade old, failing to reflect current market conditions. The DOL’s own Inspector General reported back in 1997 that inaccurate data were frequently used in Davis-Bacon wage determinations, with significant errors in 15% of the wage reports audited. In short, the prevailing wage often isn’t truly “prevailing” at all.
What do these flaws mean in practice? Generally, they result in mandated wages that are significantly higher than the actual market wages in many areas. Contractors must pay the higher of either the union scale or the weighted average from survey data – often effectively a union rate. According to a Congressional Joint Economic Committee review, Davis-Bacon wage rates average 22% above local market wage levels on federal projects. The Government Accountability Office (GAO) similarly found prevailing wages were consistently and significantly higher than Bureau of Labor Statistics (BLS) averages for the same occupations. For instance, one analysis showed common highway construction jobs had Davis-Bacon rates 20% to 47% higher than the BLS-reported average wage for those jobsl.

When mandated wages are 20–30% above what non-federal projects would pay, the cost of labor on public works shoots up accordingly. Labor often comprises 20–50% of a construction project’s cost, so an artificial 20+% wage premium can add 5–10% (or more) to total project costs. The Beacon Hill Institute estimated in 2022 that Davis-Bacon raises construction costs by at least 7.2% on average, costing taxpayers an extra $21 billion per year. That figure aligns with earlier studies in various states (e.g. a university study found prevailing wage laws increased school construction costs by 8–14%). Even the Congressional Budget Office (CBO) acknowledges the effect: CBO estimates that repealing Davis-Bacon would reduce federal construction costs by about 0.9% – roughly $20–24 billion in savings over a decadeabc.org. In other words, the federal government could build the same roads, bridges, and buildings for billions less if market wage rates prevailed. All this suggests the “prevailing” wages under current surveys are well above what a competitive market would set, forcing the public sector to overpay for construction labor.
Why haven’t these issues been fixed? GAO and the DOL IG have urged reforms for years (e.g. using statistically valid sampling and current data, or even using BLS wage data directly), but bureaucratic inertia and political pressure (unions strongly defend the status quo) have stalled major changes. Notably, legislation has been proposed in Congress – the Responsibility in Federal Contracting Act – to require the use of BLS data to calculate prevailing wages.
Economists across the spectrum agree that if we’re going to have a wage floor, it should be calculated with modern, accurate methods, not 1930s-style surveys. As a Brookings Institution analysis bluntly stated, “Davis-Bacon mandates…effectively require ‘prevailing’ union wages (often much higher than the actually prevailing market wage) [and] drive up the costs” of federal project. When a prevailing wage determination is off by a wide margin, taxpayers end up footing a bloated bill.
Real-World Impacts: Cost Overruns, Delays, and Fewer Projects Built
It’s one thing to talk about percentages and averages; it’s another to see how Davis-Bacon impacts actual projects on the ground. There’s ample evidence that these inflated wages contribute to higher costs and even project delays or cancellations in federal, state, and local construction:
- Federal Infrastructure Projects: Because Davis-Bacon applies to most federally-funded transportation and infrastructure work, the cost inflation aggregates to huge sums. The Heritage Foundation found that Davis-Bacon’s requirements likely inflate highway construction costs by anywhere from 5% to 38% (depending on the region). The U.S. Department of Transportation’s Inspector General and GAO have reported that “excessive project costs” due in part to Davis-Bacon are straining the Highway Trust Fund. In fact, the Highway Trust Fund, which finances most federal road projects, has needed repeated taxpayer bailouts – one factor being that every federally funded highway must pay these above-market wages. One Federal Highway Administration study of 20 large highway projects found cost overruns ranging up to 400% over initial estimates (though caused by many factors). Davis-Bacon isn’t solely to blame, but it certainly adds fuel to the fire of rising infrastructure costs.
- State and Local Decisions to Avoid Davis-Bacon: Perhaps the most telling evidence: many state and local agencies try to avoid using federal funds on smaller projects specifically to escape Davis-Bacon requirements. In a national GAO survey, several state DOTs admitted they sometimes decline federal funding for eligible projects to bypass the added costs and red tape. For example, a New Hampshire DOT official explained that the Davis-Bacon prevailing wage requirement can “slow a project because it imposes payroll processing requirements that create additional administrative responsibilities, particularly for small…contractors”. As a result, New Hampshire uses state funds for many road resurfacing jobs to avoid burdening small contractors with Davis-Bacon rules. GAO found this pattern in multiple states – effectively leaving federal money on the table because the strings attached (like Davis-Bacon) would delay the project or raise costs This is a lose-lose: local taxpayers then pay more, or projects are scaled down, because using federal funds isn’t worth the hassle.
- “Little Davis-Bacon” Repeals at the State Level: While not the federal law itself, many states have their own prevailing wage laws. Several have repealed or suspended them in recent years, offering a natural experiment. Michigan temporarily suspended its prevailing wage law in 1994–1997 and saw construction employment jump 48% in the following 30 months. A study of the suspension estimated that Michigan’s state and local governments saved up to $275 million in 1995 alone (about 5% of the state’s capital spending) thanks to lower project bids. More recently, states like West Virginia (repealed in 2016) and Kentucky (repealed in 2017) reported millions in savings on school and road construction after repeal, with no clear loss of quality. These state cases suggest that when prevailing wage mandates are lifted, project costs drop or more projects get built for the same money. It’s reasonable to infer similar potential at the federal level.
- Affordable Housing Projects: Davis-Bacon doesn’t only hit highways and bridges – it also applies to federally subsidized housing construction (e.g. if a Low-Income Housing Tax Credit project also receives certain federal funds or HUD grants, prevailing wages kick in). Affordable housing developers often cite Davis-Bacon as a big cost driver. A UC Berkeley/Terner Center study found that prevailing wage rules can increase low-income housing construction costs by anywhere from 9% to 37%. The wide range depends on local wage differentials – areas with large union wage gaps see the higher end. In high-cost markets like New York City, estimates have found prevailing wage mandates add roughly 23% to affordable housing costs. The New York City Independent Budget Office projected that requiring Davis-Bacon wages on certain affordable projects (under the 421a program) would cost an additional $4.2 billion, hiking construction costs by **23% (about $80,000 extra per apartment unit)**. That means 23% fewer units can be built with the same funds – a huge impact when affordable housing dollars are scarce. In California, an analysis showed that if private residential projects had to pay prevailing wages, it could raise costs ~37% and add ~$84,000 to the cost of a typical home, which illustrates why affordable housing advocates worry about these requirements.
- Case Study – Mountain View, CA: A recent saga in Mountain View (Silicon Valley) illustrates how prevailing wage can make or break a project. A developer (Prometheus Real Estate) was willing to preserve some existing low-rent apartments if allowed to build new market-rate units. The city initially welcomed the deal. But there was a catch: if any city funds or incentives were used, it would trigger prevailing wage requirements for the rehabilitation of the old apartments and possibly the new construction. At a 2019 city council meeting, the developer warned that having to pay prevailing wages would add $2 million to the cost of rehabbing 48 apartments, and a whopping $40 million more to the cost of constructing 17 new affordable units – making the project financially infeasible. The council, alarmed, scrambled for alternatives, but ultimately the prospect of an extra $40 million cost (solely due to labor rules) nearly derailed the effort. This is $40 million that could have built more homes or been used elsewhere, but instead would go just to meet wage mandates far above what the project’s contractors would normally pay. Mountain View’s experience is not unique – across the country, affordable housing developers often have to either find much more subsidy to cover Davis-Bacon costs or forgo federal/local funding (if possible) to avoid the requirement. Either way, fewer affordable units get built.
In sum, Davis-Bacon’s impact is felt in delayed and costlier public works. When agencies avoid using federal funds for fear of burdens, when contractors pad their bids knowing the labor costs will be high, or when projects shrink in scope due to budget overruns, the public loses. The Act’s requirements don’t just transfer money to workers; they often result in projects not happening in the first place (or not as many). And ironically, some evidence suggests paying above-market wages doesn’t necessarily buy higher-skilled labor or better quality – numerous studies have found no significant difference in workmanship or safety on projects without prevailing wage, likely because contractors already must meet performance standards and market wages adjust to attract needed skills. In any case, the next time you see a bridge overbudget or an affordable housing project stalled, Davis-Bacon often deserves a slice of the blame pie alongside other usual suspects (environmental reviews, NIMBY lawsuits, etc.).
Compliance Burdens: Paperwork, Audits, and Small Business Headaches
Beyond the direct dollars-and-cents cost, Davis-Bacon brings a mountain of paperwork and compliance burden that especially weighs on small construction firms. The law’s administrative requirements might be manageable for a big contractor with a compliance department, but for a smaller company, navigating these rules can be a nightmare – one that deters many from even attempting to bid on federal work.
The main compliance obligations include:
- Certified Weekly Payrolls: Contractors must pay workers weekly (instead of biweekly, etc.) and submit a detailed certified payroll report every week to the contracting agency. This report must list every worker, their classification, hours, hourly pay, fringe benefits, and deductions – basically a full accounting of each paycheck – along with a signed statement of compliance. For a firm not used to federal projects, just learning to fill out these forms correctly is a hurdle. Any error can trigger withholding of payment or an investigation.
- Onsite Postings and Interviews: The Davis-Bacon poster and the prevailing wage determination for the project must be prominently posted at the jobsite. Workers are informed they should be getting the posted wage. It’s not uncommon for DOL investigators to conduct random worker interviews on-site to verify they’re being paid the stated rates. While ensuring compliance is fine, these interviews can catch contractors off-guard if, say, a worker was misclassified under the wrong job category or is unclear about reporting.
- Recordkeeping: Contractors have to maintain detailed payroll records for 3 years after completion. This includes information on every employee’s address, Social Security number (last four digits), work classification, pay rate, hours each day and week, fringe benefit contributions, and any apprenticeship program status. This level of recordkeeping exceeds typical business practice and essentially forces companies to institute specialized payroll tracking for Davis-Bacon jobs.
- Audits and Investigations: If the DOL or contracting agency suspects a violation (or a worker complains), an audit can ensue. Underpayments must be compensated with back wages and potentially liquidated damages. Willful violators can face debarment for up to 3 years, meaning they are barred from any federal contracts. Agencies can also withhold payment on the contract until issues are resolved. The legal exposure is real: even an inadvertent payroll mistake, if not corrected, can escalate. In some cases, False Claims Act lawsuits have been brought against contractors for certifying compliance when they unknowingly made filing mistakes.
All this bureaucracy has a cost in time and money. A survey of contractors by the Federal Acquisition Advisory Panel found Davis-Bacon compliance was among the most burdensome requirements in federal contracting, particularly for firms without dedicated HR compliance staff. One small contractor commented that the paperwork “took more time than the actual work on small jobs.” Another said they had to hire an outside consultant just to handle the wage reporting on a single project, adding thousands in overhead.
Crucially, these burdens discourage small and mid-sized businesses from participating. Testimony gathered by the U.S. Small Business Administration’s Office of Advocacy in 2022 confirms this: “current DBRA wage costs and regulatory burdens already dissuade many subcontractors from bidding on federal projects*.”* Many subcontractors (who are often smaller firms) simply opt out of working on Davis-Bacon jobs because the compliance risk and hassle aren’t worth it. This reduces the pool of bidders, often leaving mainly larger, unionized contractors. Less competition can lead to higher bids, compounding the cost problem.
The SBA Advocacy report shared a striking example: a home builder doing two identical multifamily projects side by side – one subject to Davis-Bacon and one not. The project with Davis-Bacon ended up 30% higher in cost than the identical project without it. The builder also noted that many of their usual subcontractors refused to work on the Davis-Bacon job at all, due to the wage rules and paperwork. This forced them to find (and often pay more for) subs who were willing to deal with the requirements. For a small firm, even a 5–10% cost increase can make the difference between winning a bid or losing money on a job – so a 30% cost jump is devastating. It’s no wonder that, in practice, a lot of federal construction dollars end up concentrated in a smaller number of large contractors.
It’s important to note that compliance costs hit public agencies too. Every federally-assisted project requires oversight – city housing departments and state highway agencies must devote staff to reviewing certified payrolls, conducting on-site wage interviews, and coordinating with DOL. I myself am a federal worker that works for the Public Buildings Service. If we have a leak in a building and need to complete a repair that's more than $2000, this work can take weeks due to Davis-Bacon.
Many local agencies lack capacity, causing delays in approvals and added administrative expense that ultimately gets billed to the project. For example, the City of Seattle noted that fulfilling Davis-Bacon monitoring on a single affordable housing project took hundreds of staff hours that could have been spent on other housing work. All of this bureaucracy acts like sand in the gears of project delivery.
Impact on Small and Disadvantaged Businesses
An often-overlooked aspect is how Davis-Bacon may inadvertently perpetuate inequalities in the construction industry. Smaller firms, including many minority-owned, women-owned, or rural contractors, are less likely to be unionized and often pay somewhat lower (but still decent) wages that reflect local market conditions. These firms can be very competitive on price. But when forced to pay union-scale wages and handle union-level paperwork, they lose their edge or choose not to participate. This tilts the playing field toward larger unionized firms (which, historically, have had lower representation of minority workers, one of the original criticisms of Davis-Bacon’s effect on racial equality). Essentially, Davis-Bacon can act as a barrier to entry for emerging contractors, locking in the incumbent players.
In public contracting, there’s constant talk of expanding opportunities for minority-owned business (MBE) and disadvantaged business enterprises (DBE). Yet prevailing wage laws may be working at cross purposes with those goals by imposing a one-size-fits-all labor cost structure. A 2015 study in Wisconsin found that the way prevailing wages were determined led to wage rates that were “more costly in low-wage, low-income counties” and tended to price out less-experienced workers (since contractors must hire the higher-skilled, higher-paid workers to meet the rate). In effect, a small firm that might train a novice for $15/hour can’t do so on a Davis-Bacon job if the prevailing wage for that trade is $30 – they’d have to hire a union journeyman or pay the trainee double what they normally earn, which is often not viable.
To sum up, the compliance burdens and rigid wage rules of Davis-Bacon reduce the diversity and number of firms willing to build public projects. This lack of competition and innovation can only hurt the public interest in the long run. We want more bidders, including small local businesses, to get efficient and creative solutions – not fewer bidders due to onerous regulations.
Davis-Bacon by the Numbers: What Research Shows
Let’s recap some data points from research and government analyses to gauge Davis-Bacon’s overall impact (drawing from across the political spectrum):
- Inflated Wages: Davis-Bacon rates average about 20% higher than market wages nationally. GAO found an average 34% premium in a sample of counties for highway jobs. Beacon Hill (a think tank) found Davis-Bacon wages are 20.2% above local market averages when measured using modern BLS data.
- Higher Project Costs: Estimated to raise federal construction costs by roughly 0.9% of total spending (CBO); equating to $20+ billion over 10 years in federal outlays. In annual terms, that’s about $21 billion extra per year (Beacon Hill). Various academic studies of state repeals show public construction costs drop on the order of 10–15% after repeal, with no loss in quality or safety recorded.
- Fewer Projects / Units: The flip side of cost is quantity. A given budget builds ~7–10% fewer infrastructure projects due to Davis-Bacon. For affordable housing, requiring prevailing wages can mean ~20% fewer units for the same subsidy (NYC’s 23% cost hike example). This is a real trade-off: e.g., if an agency could have built 100 apartments, with prevailing wage it might only afford ~80. In an era of housing shortages, that’s significant.
- Administrative Burden: A 2008 GAO report noted that state officials cited Davis-Bacon as a source of project delays and a reason to avoid federal funds on smaller projects, especially because *“small contractors…may not understand what they must do to comply.”* The compliance cost is hard to quantify, but it effectively adds a hidden “admin tax” on projects. CBO specifically mentions that repealing Davis-Bacon would save money not just from wage reduction but also by “reducing contractors’ administrative costs associated with compliance.”
- Broader Economic Effects: A study by the Anderson Economic Group found that in Illinois, repeal of prevailing wage could save 10% on public construction costs and potentially add 14,000 new construction jobs over a decade (by stretching budgets and undertaking more projects). Similarly, Michigan’s repeal was associated with job growth in construction. The converse is that Davis-Bacon may reduce overall employment in construction by raising costs (fewer projects means fewer jobs).
- Who Benefits?: The primary beneficiaries are the workers who receive the above-market wages (and the unions who get a more level playing field against lower-wage competition). However, it’s worth noting that not all workers benefit – only those on federal jobs, which are a minority of construction work (about 20% of construction is subject to Davis-Bacon). And these tend to be union members more often than not. Meanwhile, workers who might have been employed on additional projects (if costs were lower) lose out on those job opportunities. So there’s a concentrated gain for some workers, but a diffuse loss of jobs and income for others in the sector.
- Bipartisan Analysis: While left-leaning groups like the Economic Policy Institute often defend prevailing wage laws (arguing they promote training and higher productivity), even moderate and liberal economists acknowledge the cost issue. For instance, a Brookings Institution piece on infrastructure noted that Davis-Bacon mandates “drive up the costs of roads and other projects” and identified repealing/reforming Davis-Bacon as a way to “wring wasteful spending” out of stimulus investments. The Government Accountability Office has published over 25 reports on Davis-Bacon since the 1970s, repeatedly highlighting vulnerabilities in the wage-setting process and recommending changes. And the Congressional Budget Office plainly lists Davis-Bacon repeal as a spending cut option that would save billions. On the right, groups like Cato and Heritage call for outright repeal, citing it as a prime example of a 1930s protectionist policy (even dubbing it “Jim Crow” era legislation, due to its history) that doesn’t fit a modern dynamic economy. The fact that even centrist voices say the law “needs reform” is telling – it’s not just a libertarian talking point.
Modernization and Reform: How to Build More for Less (Without Gutting Worker Pay)
If Davis-Bacon is a major culprit in driving up costs and slowing projects, what can be done? Some advocates argue for repealing the Act entirely, letting market wages prevail on public projects just as they do on private projects. In theory, this would maximize bang-for-buck – and as noted, CBO says it’d save ~$20 billion over 10 years. This is likely much more when you consider the bureaucratic burden and also the state/local levels). Repeal, however, is politically difficult. Labor unions staunchly defend Davis-Bacon, and many lawmakers worry about being seen as anti-worker if they support repeal. The good news is, short of repeal, there are pragmatic reforms that could preserve the Act’s basic intent (fair wages for workers on government jobs) while mitigating the worst inefficiencies:
- Use Accurate, Up-to-Date Data: Perhaps the single most impactful reform would be to overhaul how prevailing wages are determined. Instead of DOL’s creaky survey process, use scientific surveys by the Bureau of Labor Statistics (BLS). BLS already collects extensive wage data (via the Occupational Employment Statistics and National Compensation Survey programs). These could provide a much larger sample and more timely snapshot of actual prevailing wages. GAO has suggested allowing DOL to use broader geographic groupings (like metro areas) or BLS data to set rates. In fact, bipartisan bills to require BLS-derived prevailing wages have been introduced (e.g., H.R. 924 in 2015). If Davis-Bacon rates truly reflected the real local median wage, the cost premium would shrink dramatically – possibly saving 10-15% on some projects without changing any other aspect of the law.
- The Department of Labor could implement many methodology improvements administratively as well (and did propose some updates in 2022–23, though critics argue those changes mostly raised rates further). Modernizing the wage calculations would address the core inflationary bias.
- Raise the Project Threshold: The $2,000 threshold is absurdly low today – it means even repainting a small post office can invoke Davis-Bacon. Raising the threshold to a more meaningful level (e.g. $100,000 or more) would exempt minor projects and small businesses from the Act. This idea has been floated in the past. In the 1980s, the Reagan Administration raised the threshold administratively to $2,000 for repairs and $15,000 for new construction (and even proposed $100k), but a court struck this down as inconsistent with the statute’s $2,000 figure. Thus, Congress would have to act to change it. If adjusted for inflation since 1931, $2,000 would be roughly ~$35,000–$40,000 today, so even setting a threshold around that level (and indexing it to inflation going forward) would make sense. It would free many small-scale local projects (park shelters, routine road resurfacing, etc.) from Davis-Bacon, reducing burden on contractors and agencies. The vast majority of construction dollars (big projects) would still be covered, focusing the law where it matters most.
- Simplify Compliance: Streamlining the reporting and certification process can reduce the burden. For instance, allowing electronic certified payroll submissions and integrating them with existing payroll software could save time. DOL could also provide an online portal where contractors input data once and it auto-checks against wage requirements. Additionally, clearer guidance and training for small contractors (possibly a pre-bid workshop on compliance) could help demystify the process. Some have suggested a “safe harbor” for first-time small contractors – e.g. if minor paperwork mistakes are made, give a warning and help fix it rather than immediately penalizing. This could encourage more participation by newbies without undermining worker pay.
- Targeted Exemptions or Flexibility: Lawmakers could carve out certain categories from Davis-Bacon when it makes sense. For example, affordable housing funded by tax credits might be exempt if state/local agencies have their own wage standards, allowing more units to be built. Congress has occasionally provided Davis-Bacon waivers in emergency situations – Presidents FDR, Nixon, and Bush (41) temporarily suspended Davis-Bacon after natural disasters or during WWII to speed up work and stretch funds. Those precedents show that even leaders who support workers recognized at times the need for flexibility. One idea is to allow waivers for housing or infrastructure projects if costs come in significantly over budget due to prevailing wage, subject to approval by a high-level authority. Another idea from some housing advocates: offer a choice between paying Davis-Bacon wages or ensuring a certain percentage of local hiring from disadvantaged workers – i.e. give contractors an alternative way to fulfill a public interest goal if they can’t meet the wage rule.
- Periodic Review and Sunset: Given that Davis-Bacon has been on autopilot for decades, implementing a requirement to periodically review and reauthorize it could force reassessment of its costs and benefits. A sunset clause could be added such that Congress must vote every, say, 10 years to continue the Act, armed with fresh GAO/CBO analyses of its impact. This would at least ensure ongoing scrutiny and adjustments as needed, rather than letting a 1931 law chug along unchanged in 2031 and beyond.
It’s worth emphasizing that paying workers decently and getting projects done affordably do not have to be at odds. Many countries build infrastructure with good wages and reasonable costs – often through policies more flexible than a rigid prevailing wage mandate. Even within the U.S., most private construction projects find a balance, sometimes paying above the minimum to get skilled labor, other times hiring trainees at lower cost – all based on market needs. The government can likewise strike a better balance. For example, using BLS data might reveal that in some rural county, electricians typically make $25/hour, not the $40/hour union rate from a neighboring city – so a federal project there could reasonably pay $25 and still attract labor, rather than inflating to $40 and busting the budget. Or if a small business can do a job for less by training local workers, why shouldn’t they, as long as basic labor standards (like OSHA safety and at least minimum wage) are met?
Critics argue that lowering or eliminating prevailing wage requirements could reduce construction quality or worker livelihoods. However, numerous studies have found no significant drop in quality or safety in states post-repeal of prevailing wage laws. Construction is inherently competitive and reputation-driven; contractors who do shoddy work don’t last long, regardless of wages paid. As for workers, the construction labor market today is much tighter than in 1931 – contractors often have to pay well above minimum wage anyway to find skilled tradespeople (in fact, many non-union contractors pay competitive wages to keep talent). And if cost savings from Davis-Bacon reform allow more projects to be built, that actually creates more construction jobs. Some of those will be entry-level at lower pay, sure, but many will be good-paying too – and importantly, more total work opportunities. The alternative under Davis-Bacon is fewer jobs but at a mandated high pay for those lucky enough to get them.
It’s possible to support fair wages and collective bargaining while still questioning an inefficient federal mandate. Market-friendly progressives may argue that we should help construction workers through stronger apprenticeship programs, portable benefits, or labor-neutral project agreements – rather than through a blunt wage rule that also acts as a giveaway to certain unions and contractors. There are smarter ways to support middle-class jobs in construction without the collateral damage of Davis-Bacon’s cost inflation.
Conclusion: Building More, Building Better
America urgently needs to build more – from roads and bridges to affordable housing – but outdated policies like the Davis-Bacon Act are getting in the way. What started as a Depression-era wage protection now often acts as a drag on efficiency, inflating labor costs, drowning contractors in paperwork, and pushing small businesses out of public works. Reforming or updating Davis-Bacon isn’t about undermining workers; it’s about making sure public dollars actually get things built.
Even if we keep wage standards, they should reflect real local rates, not inflated union scales from flawed surveys. Fixing Davis-Bacon could free up billions to build more infrastructure without raising taxes – like cutting the cost of a $100 million highway to $93 million, with the savings going to other critical projects. To move forward, we need a Davis-Bacon that works with the market, not against it, keeping fair wages while making public construction more efficient and accessible.