Tuesday, June 10, 2008

Davis-Bacon Above-Market Union Wages for Everything. What's Next, A Davis-Bacon Jobs Bank?

Wall Street Journal -- What do the farm bill, the cap-and-trade global warming bill, the clean water bill, the housing bailout bill, and the school construction bill all have in common? Not much, except that in each one and countless others the Democratic majority in Congress has inserted "prevailing-wage" requirements that amount to a super-minimum wage.

This year's farm bill was the first in 75 years to require Davis-Bacon wages, in this case for the construction of ethanol plants. Democrats also slipped in Davis-Bacon rules for the wind, solar and other alternative energy projects.

What's so bad about that? According to the WSJ:

1. Federal construction costs are inflated by anywhere from 5% to 39% by requiring de facto union wages. In many cities the mandated Davis-Bacon wage is twice as high as the market wage. So while Democrats insist that one of their top priorities is to solve America's "infrastructure crisis," what they aren't saying is that we could be building about 25% more bridges and roads by repealing Davis-Bacon.

2. Davis-Bacon policies victimize minorities. A study by economists at Stanford and Harvard found that when states have repealed their Davis-Bacon laws, this "is associated with a decline in the union wage premium and an appreciable narrowing of the black/nonblack wage differential for construction workers."

MP: What's next? Maybe a Davis-Bacon "jobs bank"?

Read Walter Williams' case for the repeal of Davis-Bacon here.

18 Comments:

At 6/10/2008 9:28 AM, Anonymous E. Harokopos said...

Soviet union practices are not dead I guess. They can be found in some democratic legislation in the US. What an irony.

 
At 6/10/2008 10:08 AM, Anonymous Anonymous said...

"GM has a host of problems, from the attractiveness of its product lines to the health-care costs it pays for its one million retirees."

One more real world reason why single payer government health care is inevitable for the U.S.

GM is a shrinking company paying health care costs for one million retirees competing against companies that do not have that expense.

How do U.S. based firms compete against foreign companies that do not have similar health care costs?

 
At 6/10/2008 11:08 AM, Anonymous Anonymous said...

Similar approach was taken in Quebec. Every time a union contract was negotiated by one firm, the new wage applied across the board to every business engaged in the industry.

In the garment industry, Quebec mandated different wage scales for different types of piece work ie. the pay scale for sewing a woman's blouse was different from that for sewing a pair of men's trousers or baseball cap. Small businesses with employees that worked on different types of piece work had an administrative nightmare trying to run payroll.

The result of this command and control economic approach was to drive businesses out of Quebec and increase unemployment.

This isn't communism but socialism. The idea that an economy should be "managed" by the government.

What is truly ironic is hearing proponents of such schemes refer to them as being "market based" when they are nothing of the kind. Exhibit A: proposed cap & trade legislation

The economy doesn't need government as much as government needs the economy.

 
At 6/10/2008 11:22 AM, Blogger Walt G. said...

GM had trouble spelling “sabbatical,” so they just called it the “jobs bank.” It could easily be argued that building wheel chair ramps is just as productive as conducting research or writing a book.

The Jobs Bank contract language let management determine “appropriate alternative” work. If employees were sitting while community leaders were begging for the “free help,” something was seriously wrong. I suppose it would have been difficult to change or alter a successful program, and vilifying it in public served a legitimate business purpose.

Whether the jobs bank was a good idea or not is questionable depending on your viewpoint; however, it was never supposed to be a “sit and get paid for nothing” program. People who suffered through the program called it the “rubber room.” Try sitting in a hard-back chair for eight hours in a cramped room that is overheated or cold by design if you think it was a good idea. The ubiquitous TVs had rabbit ears that received one or two snowy stations, and were turned up so loud that reading was impossible. Employees leaving even one minute before quitting time were monitored and given penalties that could progressively lead to discharge. It sounds more like a penalty box than a gravy train to me.

The jobs bank program still technically exists, but new contract language gives GM wide latitude to move their workforce as they see fit. Anyone criticizing GM or the UAW today should read and understand the 2007 agreement before they throw stones. It really is a landmark agreement.

 
At 6/10/2008 11:24 AM, Anonymous Fred said...

"One more real world reason why single payer government health care is inevitable for the U.S."

You make that leap on the basis of GM's problems? Well then, let's see where that leap lands you: It lands you in Britain with its infamous National Health Service and dead auto industry. Jaguar? Range Rover? MG? Humber? anyone? Beuller?

 
At 6/10/2008 11:28 AM, Anonymous Dennis Blackmore said...

I am for using Iraqi oil for one year for free.

 
At 6/10/2008 11:45 AM, Blogger Walt G. said...

fred,

It's not just GM's problem. One of the biggest problems facing municipalities is unfunded liabilities for retirees. Like it or not, the taxpayers are on the hook for that one. Just yesterday, a town in (I believe) California filed bankruptcy over the problem: they are just a harbinger of things to come. A lot of promises have been made that can’t be paid for.

 
At 6/10/2008 2:08 PM, OpenID sethstorm said...

What would be inherently wrong with attempting to work with unions? It's been (at least) 30 years of bashing them with the same lines.

Here's an idea - in exchange for no-contest trade agreements/laws, repeal a ton of anti-union laws/practices.
This means:
* The repeal of Taft-Hartley and supporting structures.
* "Right To Work" and related laws would be made unenforceable.
* Tactics that have been used by "labor consulting" groups would be declared illegal. This includes (but is not limited to) agitation to create violations(Vance International), stacking the deck with anti-union votes(Wal-Mart, Delta), closing down when losing to a union(Wal-Mart).
* Companies can no longer wage a "war of attrition" to starve support. This also includes any redirection to places such as China, Mexico, and other low-quality product nations. In extension, products cannot simply be made in low-quality product nations and assembled here(CKD, Honda, Toyota, etc.).
* Trade agreements and laws are predicated on the existence of these prohibitions and repeals.

In summary - unconditional and pork-less trade agreements for unconditional cease-fire on unions.

 
At 6/10/2008 2:15 PM, OpenID sethstorm said...

Fred:
That was part due to the nation not knowing the consequences of Thatcher's plans. They thought they would get prosperity. The actual result was economic colonization of the UK by its former colonies.

 
At 6/10/2008 5:03 PM, Blogger juandos said...

Well we can see why sethstorm's commie ideas will fly like a lead brick...

These bizzare ideas don't work and there's at least 8 decades of history to prove it...

How did it work out in China?

China changed?

How did it work out in the Soviet Union?

No more Soviet Union...

How did it work out in N. Korea?

They are still starving...

How did it work out in Cuba?

Cuba is still a third world haven for losers...

 
At 6/10/2008 6:10 PM, Blogger Walt G. said...

Juandos,

I agree with you. Any system that does not recognize that we are in a global economy is destined to fail. You can’t play by the old rules anymore because capital can move too easily—that can’t really be stopped. I don’t think it would be smart to try.

In addition to the global economy, any business that does not recognize that their workers are their biggest asset is destined to fail, too. Oftentimes—most times I would say—people will make the right decisions if given the information they need in an atmosphere of trust.

Of course, some of the jobs will leave the country; however, great opportunities exist when that change occurs. Workers have to be adaptable, well-trained, and willing to relocate to the work. It’s not reasonable, in this day and age, to sit back and wait for something to happen. As a country, I feel, our best times are now and lie ahead in our future.

 
At 6/10/2008 7:19 PM, Anonymous Anonymous said...

Fred sed...

"You make that leap on the basis of GM's problems? Well then, let's see where that leap lands you: It lands you in Britain with its infamous National Health Service and dead auto industry. Jaguar? Range Rover? MG? Humber? anyone? Beuller?"

I prefer to leap to Japan. Nissan, Toyota, Honda... :D

 
At 6/10/2008 9:53 PM, OpenID sethstorm said...

A lead brick will fly given a high enough force applied to it.

On a more serious note...
It is ironic that it took 80 years for your case to come to light. It only took a bit under 30 years to present a challenge to this model. That even would have been faster if not for attacking one class of work at a time.

Juandos:
You seem to be afraid that they're just waiting for the right moment to release nearly 30 years of rage upon our nation. If you're right, why not allow a scapegoat of some value of them to be slayed? It gives you access to trade deals, and it gives them a lasting victory. It's win-win for both parties involved.

With this kind of deal, you seem to think that international trade deals are not worth this cost. The unions can't touch the trade deals, and the business community can't stifle the choice of security.

 
At 6/10/2008 9:56 PM, OpenID sethstorm said...

anon 7:19:
I make my leaps to GM models that are highly domestic. That is, 75% or higher. I've yet to be disappointed by their quality or performance.

 
At 6/11/2008 8:46 AM, Blogger OBloodyHell said...

> > GM has a host of problems, from the attractiveness of its product lines to the health-care costs it pays for its one million retirees.

> One more real world reason why single payer government health care is inevitable for the U.S.



Ah, F**K no!?!?

The question isn't why it's such a problem for GM. The question is why the idiots in charge of the system set up a U.S. Social Security-like Ponzi scheme for funding retiree healthcare.

It's flat out obvious that the proper way to fund such a system is to put money into a fund that is largely self-contained for the people "currently in it" -- and as they get added, to add more.

Like "Duh".

 
At 6/11/2008 8:49 AM, Blogger OBloodyHell said...

> The economy doesn't need government as much as government needs the economy.

But what the citizens need is economy of government (Sense 1).

 
At 6/11/2008 9:25 AM, Blogger OBloodyHell said...

> Fred:
That was part due to the nation not knowing the consequences of Thatcher's plans. They thought they would get prosperity. The actual result was economic colonization of the UK by its former colonies.


Yeah, right. I *owned* an MGB you nit. I know the history of the company, and they produced the best damned car the UK made in the 60s. They still weren't bright enough to update it for the entire 70s (most parts are the same from 1965 to 1980, when they ceased production). Yes, *1980*. I'm sure that was all Thatcher's fault. She killed British Leyland in her first year in office, after killing a host of other Brit lines BEFORE she took office. It had nothing to do with shoddy product, poor workmanship, or egregiously bad management. None. Zippo. Zilch. Nada. Nein, nein, nien!!!


The UK auto industry tanked because it did crap-all to update itself for over a decade or more, starting in the 60s or earlier, and their cars & designs grew increasingly dated. They also had massive problems with reliability -- Read Art Buchwald's Playboy piece on the three successive Rolls-Royces he owned, all complete lemons spending literally more time in the repair shop than they did on the road.
They also had a particularly egregious tendency to design their parts around some wierd specialty tools which were unique to "this particular repair job, on this particular model car, duing this particular range of a couple years" -- really. Ask my former MG mechanic about his funky tool collection.

The Brits screwed themselves with socialism in the 50s, 60s, and 70s. Thatcher and her crowd saved the UK's financial asses by abandoning most of that crap in the 80s, or they'd BE a third-world nation by now. If they'd adopted more of the free-market notions, they'd be more in charge of the EU, because they'd be the 600 pound gorilla of Europe, not Germany.

 
At 12/07/2008 9:22 AM, Blogger Edward said...

absolutely correct, it needs to be repealed, only 15% of the work force benefits from this law and it is a direct cause of the $400. toilet seat and the $300. hammer, infrastructure could be rebuilt through competitive bidding without huge wage payouts. As a small contractor I’ve seen the results first hand paying an employee $15.00 per hour and then landing a PW project where the pay is easily doubled and guess what, never made a dime on one of those jobs, seems like an employee abuses the privelege and accomplishes nothing, many many excuses as to why project is not completed not to mention additional added costs to keep redoing work

 

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