Short of Prevailing Wage Repeal, Critics Want Calculation Change

By Elliott T. Dube

Davis-Bacon Act critics are aiming to change the law’s method for determining prevailing wage rates after having been unsuccessful with efforts to repeal the law.

The Labor Department uses voluntary surveys of local wage and fringe benefit information to set Davis-Bacon rates for certain workers on federally funded construction projects. Nonunion contractors and employer groups oppose this system, saying it results in high wage rates and gives an unfair competitive advantage to unions. Many critics have been promoting a switch to what they see as more consistently up-to-date Bureau of Labor Statistics data.

A renewed push for such a change came last week with legislation introduced by Sen. Jeff Flake (R-Ariz.). Under his bill, the DOL would move to a Davis-Bacon rate calculation method involving BLS surveys “that use proper representative statistical sampling techniques.”

Associated Builders & Contractors, a group of primarily nonunion contractors, supports Flake’s bill while still retaining its larger goal of repealing Davis-Bacon. A switch to BLS data would be “politically a little more palatable” than a repeal, said Ben Brubeck, ABC’s vice president of regulatory, labor, and state affairs.

“We’re not talking about driving wages down to the ground,” Brubeck told Bloomberg BNA. “We’re just talking about having a uniform, smoother way that they are calculated.”

But backers of the current system, including many unions and unionized contractors, argue that the proposed change would nevertheless result in lower wage rates for workers covered by Davis-Bacon.

The current system was “actually built to figure out how much people are being paid on construction projects,” but the “aggregated statistics tracking machine” of the BLS system wasn’t, said John Nesse, a labor relations attorney for Management Guidance LLP in St. Paul, Minn.

Nesse spoke to Bloomberg BNA on behalf of his client, the Signatory Wall & Ceiling Contractors Alliance. The contractor group is one of several that make up the Construction Employers of America coalition, which supports maintaining and strengthening current Davis-Bacon standards.

Critics Cite Faulty Sample Sizes, Lack of Updates

In the current system, the DOL’s Wage & Hour Division uses wage and fringe benefit information from voluntary surveys to determine the prevailing wage rate for federal contract work within a locality.

The agency calculates the rate based on wage information it receives from at least three employees of at least two employers for a relevant job classification. Although the DOL tries to get information for individual counties, it might have to group counties together to get a large enough sample.

Critics say sample sizes for some areas might end up being too small or that the agency might combine places that aren’t economically similar.

Critics also point to a number of geographic areas that haven’t had Davis-Bacon wage rate updates in several years. This can be especially problematic when an area’s wage rates were set in an economic climate that has long since shifted, Brubeck said.

Proponents of a change recommend using two BLS surveys instead of the voluntary survey data. The semiannual Occupational Employment Statistics survey provides wage data by occupation at the metropolitan statistical area level, without surveying benefits. The annual National Compensation Survey provides pay and benefit estimates at the national level.

Fringe benefit rates seem “all over the place” in the current system, with the ratio of benefits to wages being “ridiculously” high for certain union-heavy urban market trades but much lower in rural markets, Brubeck said. Using BLS data for fringe benefit estimates would create a “middle ground there instead of having these wild swings,” he said.

In addition, critics of the current system say a disproportionately high percentage of survey responses have come from contractors paying at collectively bargained union wage rates. A 2011 Government Accountability Office report found that 63 percent of Davis-Bacon prevailing wage rates were union rates at a point when union contracts covered merely 14 percent of U.S. construction workers.

Encouraging more contractors to submit surveys is key to improving the system for determining prevailing wage rates, Nesse said. “In the end, I think that changing the system because there aren’t enough resources in the system to generate sufficient survey results from some people’s perspective—that’s throwing the baby out with the bath water.”

Nesse also pointed out that the current survey program distinguishes between different kinds of work done in building, heavy, highway, and residential construction. The BLS surveys don’t dig as deep, he said.

A switch to BLS data would lead to a “reversion to the mean” and wouldn’t reflect a “more sophisticated and skilled” type of construction worker as accurately as the current system does, Nesse said.

To contact the reporter on this story: Elliott T. Dube in Washington at edube@bna.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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