FROM DAVIS-BACON TO
MICHIGAN’S PREVAILING WAGE ACT
The idea of legislating a prevailing wage law began in the late 19th Century as a way to assist workers trying to support themselves and their families. Initially, the rationale was poignant but limited: to lessen the economic exploitation of an ever-growing number of hourly wage workers. A second reason that later gained broad, public support – and the one most often voice by political reformers – was that forcing workers to work for low wages was contrary to the nation’s goal of raising the standard of living for all Americans.
In that early industrial era, almost all jobs were low paying and worker protections were non-existent. Even worse, though the courts had ruled otherwise, those who sought change using collective action were still often viewed as part of a ”criminal conspiracy.” For workers, conditions couldn’t be worse. While the economy as whole continued to expand, most industries (and their workers) suffered from fairly regular and sometimes extreme business fluctuations – making work relationships tenuous at best and making job security an all but impossible goal to achieve.
In such an economic environment, employers were free to “bargain” with workers – primarily to see which one would work for the lowest wage. With exploitation so pervasive, workers could find themselves working up to twelve or more hours per day and seven days a week for less than subsistence. For workers with families, their economic plight often made it necessary to have more than one income – forcing both parents to work many hours each day for meager pay and often forcing children to work instead of going to school.
However, even before the end of the last century, many Americans began to question why such conditions were afflicting an ever-greater number of workers. More to the point, a growing number came to believe that, having an economic system that favored businesses which paid the least possible wages was clearly incompatible with our country’s founding principles of freedom, equality, justice, and the “pursuit of happiness.” In fact, many reformers went further, charging that it was blatantly hypocritical for America to espouse the benefits of a “free enterprise system” while the reality was increasing impoverishment.
In 1891 Kansas became the first state to attempt to alleviate these problems by passing, the Eight-Hour Bill, which included the idea of a prevailing wage. It is of interest to note that, around the turn of the century, wages were generally paid on a per diem basis. The Kansas Eight-Hour Bill required that the minimum per diem wage that prevailed before passage of the law would remain at that rate for an eight hour work day on all public works projects. Over the next three decades many states adopted legislation similar to the Kansas bill and by the end of the 1920s forty-one states had passed some sort of prevailing wage provision.
During the “Roaring ‘20s” the construction industry generally and workers in particular, became increasingly demoralized as underbidding and cutthroat competition became pervasive. For example, in 1927 New York contractors eagerly sought the many federal contracts being awarded to build a Veteran's Hospital. However, because the New York contractors submitted bids based on wages prevalent in the local labor market, they found themselves under-bid by an Alabama “construction company.” Once the contracts had been awarded, the Alabama company imported all its workers from its home state where wage levels were substantially lower than those paid in New York. Coming to the defense of his local businessmen, Representative Robert Bacon submitted a bill to Congress that required any contractor awarded a federal contract to pay its workers at least the “prevailing wage” in the local area. Though Bacon’s bill was initially defeated, his proposed legislation would eventually become the basis for the Davis-Bacon Act. Representative Bacon justified his proposal as follows:
The Veteran's
Hospital was awarded to a firm from Alabama who had brought some one thousand
workers into my district. They were
herded onto this job, they were housed in shacks, they were paid a very low
wage, and the work proceeded. It seemed
to me that the federal government should not engage in work in any state and
undermine the labor conditions and wages paid in that state. The least the government should do is comply
with the local standards in the locality where the construction is to take
place."
The
Need for a Prevailing Wage Standard
In
the early 1930s, in the depths of the Great Depression, Congress was under
enormous pressure to deal with the growing problems arising out of unfair
contract-labor practices on public works projects such as those denounced by
Representative Bacon. By awarding
federal contracts in this environment, the federal government became involved
as an "unwilling collaborator with unscrupulous firms that sought to get
government business by cutting wages."
For
many in Congress (both Republicans and Democrats), the structure of the federal
bidding process unconscionably tended to favor contractors with low-wage,
low-skill laborers (even if family-wage contractors were otherwise superior in
terms of efficiency, management of sub-contractors, quality of work, and profit
rates). Compounding the problem
further, the low-wage, low-skill contractor too often balanced out poor
efficiency, poor quality, and poor management by grinding down the wages and
benefits of its laborers. Nevertheless,
the federal bidding process might—and often did—require the awarding of
contracts to such firms in preference to an efficient, well-managed,
high-quality product, family-wage firm.
The
Davis-Bacon Act was designed to address these and other such problems by
requiring wages paid on federally financed projects to be no lower than the
wage standard in the community where the project is to be built. Thus it placed a floor on wages paid, and
directed contractors to compete on the basis of management efficiency, profit
rates, quality of work, and better management of sub-contractors and materials
suppliers.
In
effect, it had become clear to Congress that in order to combat such unfair and
damaging contracting practices, and to establish better and more productive
standards of competition, a means of setting minimum standards for wage rates
on public construction projects was necessary. The response was
not long in coming from the Hoover Administration and its Republican allies
along with Democrats in Congress.
Passage
of the Act and Early Refinements
The
Davis-Bacon Act of 1931 was sponsored by two Republicans, Representative Robert
Bacon (R-NY) and Senator James Davis (R-PA).
The Act provided that payment to workers on federal construction
projects should be consistent with prevailing community wage standards.
Yet
the original 1931 Act was short and left a number of loopholes. Clever contractors found numerous ways
around the Act's requirements. In
response to this evasion of the Act, President Hoover issued an executive order
the following year (1932) to strengthen its enforcement:
·
All wages to be paid once a week. This went a long
way toward standardizing record keeping, prevented employers from holding wages
over extended periods, and strengthened enforcement.
·
Employees to be paid for the duties they perform. Some
contractors had tried to evade the Act by giving all their workers low-pay job
titles even though they were doing the work normally associated with higher-pay
job titles. Henceforth employees would
have to be paid on the basis of the work they did and not on the basis of their
job titles.
·
Contractors to make payroll information available to the
contracting agency for review, and to post a schedule at the work site of the
prevailing rates of wages for each class of worker. By making payroll
information available to the contracting agency, compliance with the Act could
be more easily determined. Posting wage
rates at the job site allowed employees to become educated as to their rights,
thereby increasing the likelihood that violations would be reported and abuses
corrected.
·
Violations of Davis-Bacon Act provisions to result in the
termination of the contract or other penalties. Faced with penalties
for violations of the Act, contractors would be more likely to provide fair
wages to their employees.
The Act also provided that the President of the United
States, in the case of national emergency, could suspend the wage provisions of
the Act. The Act has been suspended
three times since 1931: President Roosevelt suspended the Act for three weeks
in 1934 in order to manage administrative adjustments in light of the New Deal;
President Nixon suspended the Act for one month in 1971 in an effort to reduce
pressures of inflation; and President Bush suspended the Act briefly in 1992 to
aid in the reconstruction of buildings damaged by hurricanes. Bush's suspension was open-ended and many
believed that it was not justified.
After President Clinton took office in 1993, he re-instated the Act.
The
“Anti-Kickback" Act
Another
method dishonest contractors used to evade the Act was to pay their employees
the prevailing wage rates in the first instance. Then require employees to "kick back" a portion of
their wages under the table as a condition of continuing employment or in the
face of other sorts of threats. These
"kickback" schemes were rampant and lead to the passage of the
Copeland "Anti-Kickback" Act, sponsored by Senator Royal Copeland
(R-NY) in 1934. This Act made it
illegal to induce an employee "to give up any part of the compensation to
which he is entitled under his contract of employment." The Copeland Act also required employers to
file weekly reports of wages paid to employees on a given project,
incorporating two of the provisions of Hoover's 1932 executive order.
Congress
Strengthens the Davis-Bacon Act in 1935
The
Davis-Bacon Act was substantially amended and clarified in 1935. As amended, the Act required that all
"laborers and mechanics" employed on federally financed public works
construction projects in excess of $2,000 had to be paid no less than the rate
of wages prevailing for similar work in the same locality. "Prevailing rates" were defined as
those found to be the prevailing (or most common) wages received by other
laborers performing similar duties on projects of similar character in the same
locality. The 1935 amendments also
required the Secretary of Labor to notify contractors as to the prevailing wage
rates at or before the time of contracting.
The
enforcement provisions of the Act were also strengthened. If a contractor failed to pay the prevailing
wages, the remedies for public agencies included withholding pay- ments to the
contractor, termination of the contract, and/or requiring the contractor to pay
restitution to the employees. A
contractor who violated the law could also be declared ineligible to bid on public
construction projects for up to three years.
Several
provisions of Hoover's executive order were rolled into the Act itself. Contractors were now required by statute to
post prevailing wage rates at the project site. Contractors were also required to pay wages at least once a
week. This latter provision was
designed to prevent contractors from devising methods of keeping some of the
earned wages, including variations on the "kickback" abuses that were
also outlawed.
The
Davis-Bacon Act Continues to Enjoy Strong Support in Congress But . . .Since the 1930’s, there have continued to be persistent
attempts to repeal or substantially undermine the provisions of the Davis-Bacon
Act. However, while the Davis-Bacon Act
has continued to receive strong support from a majority in Congress, its supporters
know they must remain ever vigilant and prepared to vigorously defend it
anew.
In
addition, and of even greater concern since the 1980s, the struggle over the
prevailing wage has spread to the states.
During the past two decades, nine states have repealed their prevailing
wage laws. In other states, only
successfully fought epic battles between supporters and a host of anti-union
organizations and non-union contractors have kept their states from the same
fate. A litany of struggles that is
well-known to all prevailing wage supporters in Michigan -- a state which has
been at or near the epicenter of some of the fiercest struggles in recent
years. (For more, read Professor Daniel
Kruger’s article “Why Keep Michigan’s
Prevailing Wage?”)
MICHIGAN’S
PREVAILING WAGE ACT
Michigan’s Prevailing Wage Act became law in 1965. Like the provisions of its federal counterpart, the Davis-Bacon Act, the prevailing wage was enacted for two primary purposes:
1. To ensure that skilled construction workers who worked on state and local publicly funded projects would be paid at least the wages and benefits that “prevailed” in their local communities
2. To ensure that predatory contractors would not have an incentive to import unskilled or low-skilled workers from other parts of the country who were willing to work for less than the local market was paying.
Executive
Summary
Since
1965, Michigan's economic and social structures have benefited from this
progressive public policy. This
Prevailing Wage summary details the positive aspects of Michigan's Public Act
166 of 1965.
THE REAL FACTS ARE:
1.
Michigan's Prevailing
Wage Law does not increase costs.
2.
Michigan's Prevailing
Wage strongly supports the construction industry by providing:
a.
excellent healthcare
coverage
b.
sound pension
programs
c.
favorable wage
packages
d.
fully funded training
All of these positive lifestyle factors reduce the negative
societal impact of cost shifting from inadequate healthcare, lack of pension
coverage, meagerly funded training programs and substandard wages.
3.
Michigan's Prevailing
Wage provides a critical foundation for construction trades apprenticeship
training programs. These apprenticeship
programs are the cornerstone of Michigan's highly skilled and highly productive
construction workforces. Having a
highly qualified construction workforce helps make Michigan an attractive place
to build a new plant or modernize an existing factory. Michigan's highly qualified contractors and
tradespeople help bring manufacturing jobs back to Michigan.
4.
Michigan's
construction industry already has a difficult time trying to recruit young
people into our trade. Repealing the
Prevailing Wage and slashing wages is totally contradictory to the pursuit of
recruiting more young people. If fewer
young people choose construction as a career, our ability to build the
industrial, institutional, and commercial job providing facilities is severely
compromised.