Wednesday, January 21, 2009

Wall Street Journal cites BHI study on prevailing wage laws

Some good advice for President Obama should he take it.
President Obama said in his Inaugural Address yesterday that government must spend to rebuild roads and bridges, but that those "who manage the public's dollars" must also "spend wisely" and "reform bad habits." With that ambition in mind, here's an idea to save tens of billions of taxpayer dollars in the months ahead: Repeal Davis-Bacon superminimum wage requirements for construction projects.

We're referring to the 1931 law that requires contractors on all federal projects to pay a "prevailing wage." In practice, this means paying the highest union wage in every part of the country. Over the years nearly every analysis -- by the Congressional Budget Office, the Government Accountability Office and Office of Management and Budget -- has concluded that Davis-Bacon tangles projects in red tape and inflates federal construction costs.

A 2008 study by Suffolk University and the Beacon Hill Institute examined local wage data for construction workers and found that the Department of Labor estimates for the "prevailing wage" in cities are about 22% above the actual wages paid in these cities. It estimates that Davis-Bacon adds slightly less than 10% to federal building costs, or $8.4 billion a year.

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