Davis-Bacon and (supposedly) lean budgets

From the editorialists of the WSJ, a reminder of the cost of one favorite union policy, Davis-Bacon or "prevailing wage" laws.

These laws mandate a prevailing (read union) wage on public works projects. The law has explicitly racist origins-- and in any case, racial implications. It increases taxes. It reduces competition in an unfair manner.

In the context of tough budget times, they should be among the first things to go. But given the power of unions as an interest group-- and the public's ignorance of this policy-- it will likely stay.

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 super-minimum wage requirements for construction projects....

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.

Davis-Bacon was devised in part as a way to keep blacks and immigrants from federal construction projects during the Depression....

George W. Bush briefly suspended Davis-Bacon during the Gulf Coast clean-up after Hurricane Katrina in 2005. But the unions howled that immigrant workers were filling the reconstruction jobs at lower wages. So under intense pressure from Members of Congress in both political parties, Mr. Bush backed down.

The savings for taxpayers from waiving Davis-Bacon would be even greater amid the staggering new spending contemplated for the stimulus bill. Let's say Congress spends $400 billion over the next two years on roads, mass transit or other construction. Assuming only a 10% cost savings -- the lower end of economic estimates -- would mean about $40 billion...