Biden Ignores Inflationary Effects of Helping Big Unions

Although Joe Biden has been busy laying blame for surging inflation everywhere except on his administration’s policies, he is overseeing yet another political favor to big labor that will continue to press prices ever higher.

The White House is forging ahead with plans to hike wages for all federal contractors, unwinding a Reagan administration policy put in place to curb the inflation that was crushing the economy in the early 1980s.

Biden’s Department of Labor announced on March 18 that it is updating the administrative interpretation of the Davis-Bacon Act.

That federal law enacted in 1931 required that a “prevailing wage” be paid to all government contractors. The act placed an effective floor on government contracts by prohibiting bidders from undercutting the competition by lowering wages. The result has been artificially high wages paid by government contractors over the years.

Large unions have enjoyed the benefits of Davis-Bacon for decades in that it limits competition from non-union bidders for public contracts. The result has been to the disadvantage of black and other minority workers.

In its announcement, the Labor Department said the new regulations will be the first significant revision of Davis-Bacon interpretations in 40 years. The proposed changes will be coming at the same time that more than $500 billion in new federal spending will be going to public works contracts. That massive new spending comes as a result of Republican cooperation with the Biden administration in passing last year’s infrastructure bill.

American Action Forum director Dan Bosch writes that the major change proposed by the Labor Department will make inflation worse and cause fewer infrastructure projects to be funded.

Bosch points to a change made in 1982 to the Labor Department’s “30 percent rule” that provided for the “prevailing wage” as required by Davis-Bacon for a geographic area to be based on the highest wage paid in the area. The rule applied as long as that highest wage was paid to at least 30 percent of workers in the area.

The Labor Department repealed the 30 percent rule partly in response to a 1979 call for the repeal of the entire Davis-Bacon Act by the General Accounting Office. The recommendation came because the Labor Department had failed to develop an “effective program to issue and maintain accurate wage determinations.” The act was also described as inflationary and was said to cause unnecessary additional construction costs for all public works.

Since 1982, the “prevailing wage” has been determined by calculating a weighted average of all wages paid in a given geographic area. The Labor Department is now proposing a partial reinstatement of the 30 percent rule that will lead to estimated average increases in labor costs for government projects of $3.65 per labor hour.

Bosch wrote that the new change is “ill-times” in light of current inflation levels and the immense size of expected infrastructure spending coming along. The increased labor costs would both increase price inflation for all goods and reduce the total money available for funding projects, meaning fewer total projects will be able to proceed.

The Biden administration is anxious to carry through with political promises to labor unions while leaving ordinary American consumers to figure out how to pay the bills.