Prevailing Wage Legislation and the Continuing Significance of Race

My new article, just published in the Notre Dame Journal of Legislation, tackles the controversy over whether laws that require government construction contractors to pay the prevailing wage have a racist history, and whether they continue to have discriminatory effects on minority workers.

Here's the abstract:

Since the early twentieth century, labor unions have lobbied federal and state governments to enact and enforce laws requiring government contractors to pay "prevailing wages" to employees on public works projects. These laws, currently active at the federal level and in approximately thirty states, typically in practice require that contractors pay according to the local union wage scale. The laws also require employers to adhere to union work rules. The combination of these rules makes it extremely difficult for nonunion contractors to compete for public works contracts.

Meanwhile, construction unions have been among the most persistently exclusionary institutions in American society. Not surprisingly, in many cases, the history of prevailing wage legislation has been intertwined with the history of racial discrimination. Economists and others argue that prevailing wage legislation continues to have discriminatory effects on minorities today. Union advocates, not surprisingly, deny that prevailing wage laws have discriminatory effects. More surprisingly, they deny that the granddaddy of modern prevailing wage legislation, the federal Davis-Bacon Act of 1931, had discriminatory intent.

Part I of this Article discusses the discriminatory history of the most significant of all prevailing wage laws, the Davis-Bacon Act. As discussed below, Davis-Bacon was passed with the explicit intent of excluding African American workers from federal construction projects, and its discriminatory effects continued for decades.

Part II of this Article discusses the controversy over whether prevailing wage legislation continues to have discriminatory effects. The section begins with a discussion of the empirical literature on the effects of prevailing wage discrimination on minority employment. The section next presents evidence that construction unions continue to discriminate against members of minority groups, albeit much more subtly than in the past. The section concludes by recounting allegations that prevailing wage legislation serves to exclude minority contractors from obtaining government contracts.

Comments

[Eddy]

Outside the context of voting (15th Amendment), what's the originalist argument that the federal government can't be racist when carrying out its enumerated powers?

[Martinned]

No State shall (...) deny to any person within its jurisdiction the equal protection of the laws.

[Eddy]

Federal government

[Martinned]

Ah, right. Comment withdrawn.

[Martinned]

While it's probably not within most people's version of originalism, I offer you this recent comment from the UK Supreme Court, rejecting equal treatment as an independent grounds for judicial review in English administrative law:

Consistency of treatment is, as Lord Hoffmann observed in Matedeen v Pointu [1999] 1 AC 98, at
para 9 "a general axiom of rational behaviour". The common law principle of equality is usually no more than a particular application of the ordinary requirement of rationality imposed on public authorities.

[NToJ]

I sense from "originalist argument" that you're probably already aware of this, but the current basis is Bolling v. Sharpe with the reverse incorporation argument. To the extent you're ruling out Bolling as an "originalist argument" I generally agree.

[Martinned]

Well yes, obviously a law that prevents people from paying black people less than white people must be racist!

[DjDiverDan]

A law that prohibits black people from competing with white people on the basis of price IS racist! Learn some basic economics, Martinned, before spew your idiotic sound bits.

Prevailing wage laws, like minimum wage laws, have some profound adverse consequences, and all of them fall most harshly on the most disadvantaged. The history of minimum wage laws elsewhere is highly instructive. It was the exclusively white miners unions in South Africa that lobbied hard for minimum wage laws - not to increase their own wages, they were already making as much or more than the floor they lobbied for. No, the sole purpose was to prevent black miners from offering to work for less in order to escape unemployment. Labor Unions in the early 20th Century in America were openly and notoriously racist and exclusionary. The Railway Workers Unions refused to accept any black railway workers into their ranks, and when black workers formed their own union, the Brotherhood of Sleeping Car Porters, and when the BSCP struck for higher wages and better working conditions, the white labor unions not only refused to help, they actively opposed the black workers.

[Martinned]

I'll do you one better. Since I have a Ph.D. in economics, I know that unions excluding black workers from membership is racist. Forbidding black workers from being paid less than whites isn't. Amazing what a couple of decades of higher education will teach you...

[rsteinmetz]

The effect of Davis Bacon was to preserve a union hold on federal contracting and as a result excluded blacks from that work since construction unions were racist.

[bernard11]

That pretty well summarizes the article, I'd say. The only part you left out was Nixon's alleged deep concern about minority unemployment, and that omission improves things.

[Pacific]

Conveniently, the Bernstein solution is to disregard the racial discrimination and support weakening the unions and lowering the wages of the white workers.

[Rev. Arthur L. Kirkland]

You want to see a pivot? Ask Prof. Bernstein to discuss race-targeting voter suppression.

[TwelveInchPianist]

Measures designed to prevent black workers from competing on price with white workers are racist. If they didn't teach you that in Ph.D. school, maybe you can ask for a refund.

[DjDiverDan]

The fact you have a PhD in economics is NO guaranty that you know economics. Peter Navarro has a PhD in Economics from Harvard, yet remains appallingly ignorant of the most basic of trade economics. John Kenneth Galbraith had a PhD in Economics (also from Harvard), yet he couldn't figure out that if you paid farm owners NOT to grow crops, as in the Agricultural Adjustment Act of 1935, it created an incentive for land owners to dispossess hundreds of thousands of tenant farmers and sharecroppers, creating massive homelessness and poverty among poor blacks in the south during FDR's "I'll make this Depression GREAT" economically idiotic New Deal. If you actually knew economics, you'd know that any regulation which prohibits certain transactions restricts the liberty of BOTH parties to those transactions - yes, it prohibits employers from paying less than the "prevailing" (i.e., union-fixed) wage, it ALSO prohibits prospective employees, whose only other option might well be unemployment, from ACCEPTING a lower wage. In your case, apparently, all a couple of decades of higher education did for you is to indoctrinate you in idiocy while ignoring logic and reason. In your case, the PhD really does stand for "Piled Higher and Deeper."

BTW, I think you have an excellent case to sue the institution which granted you a PhD in Economics for educational malpractice. Res ipsa loquiter.

[Martinned]

*loquitur

(I also took Latin in high school.)

[Martinned]

But seriously, the impact of various kinds of minimum wage legislation is one of the most-studied questions in economics, and the result is almost universally that non-crazy levels of minimum wage have virtually no impact on employment. Of course, that upsets the libertarians who never studied past Econ 101, but that's not my problem.

[DjDiverDan]

If you are speaking of the Card-Katz-Kreuger studies, READ the damn studies, then try to justify the methodology. Economic empirical studies are notorious for bad methodology. In the case of those studies, just ONE, among a great many, of the flaws in methodology is the period examined. Even though the statutes were passed raising the minimum wage many months, even a year, before the raises went into effect, Card, Katz & Kreuger only looked at the period beginning 30 days before the effective date and ending 4-5 months thereafter. That ASSUMES that employers, knowing about the impending raises in minimum wage for up to one year, do NOTHING to prepare for the wage hikes until it is immediately upon them; a grossly unwarranted assumption. If you design a study so that it does NOT find any disemployment effect from raises in the minimum wage, odds are that is exactly what you'll find. Frankly, the work of David Neumark and William Wascher on the disemployment effects of minimum wages is of a far higher quality, and unambiguously finds that minimum wage laws not only creates higher unemployment, but disproportionately so in young and minority populations. If you are the kind of Economics professor that blindly accepts the findings of any study which confirms your biases (like Paul Krugman), without regard to methodological flaws, I weep for your students.

[Hey Skipper]

Why pay economists to do a study when the real world has already done so?

Compare France's minimum wage with the US.

Compare youth unemployment on both countries.

Make a stab at which one is three time higher than the other.

[DjDiverDan]

Such comparisons can be very misleading unless you at least try to control for confounding variables. Puerto Rico has the very same minimum wage as the United States, but its general unemployment rate and youth unemployment rate are much higher, and its labor participation rate is much, much lower (only about 40%). Why? Because Puerto Rico has a median income level far below that of the mainland U.S. As a direct result of "progressive" idiocy, both in Washington, D.C. (legislating a national minimum wage applicable to PR and the Jones Act), and in San Juan (enacting tight labor restrictions making it nigh impossible to fire an employee), PR has a lower standard of living and higher poverty rate than neighboring Caribbean Islands like the Dominican Republic.

Confounding variables make economic studies very difficult to do right, and failing to properly control for them is a very common flaw leading to unreliable or just plain wrong conclusions.

[Hey Skipper]

One of the ways to control for confounding variables is to try and eliminate as many as possible by making the comparison as similar as possible.

France is far more similar to the US than Puerto Rico. So it makes more sense to look for confounding variables in the comparison made than in one that wasn't.

So, what confounding variables are there between France and the US that swamp the far higher minimum wage in France being in a cause and effect relationship with its 3x higher youth unemployment rate?

[DjDiverDan]

One important confounding variable is the difference in labor laws generally between France and the U.S. French law is MUCH more generous than the U.S. in terms of mandatory paid holidays and sick leave, and imposes significant limits on the ability of French employers to fire or lay off employees. A much higher cost to release employees translates into a higher cost to hire, so, even if the minimum wage were comparable (i.e., very close to the same percentage of national median income), one would expect a higher unemployment rate generally in France. As a general rule, the "stickier" the labor market is - i.e., the higher the transactions costs imposed by so-called "labor protection" laws - the more supply and demand curves are warped. One can try to adjust by estimating extra costs imposed on employers by government regulations and shifting the demand curve for labor accordingly, but this is imprecise at best, since there is no good way to accurately assess these costs, and because the supply of labor is not homogenous; there are different demand curves for Electrical Engineers than for restaurant wait staff, and the costs imposed by labor regulation are not uniform across all these various submarkets.

[Hey Skipper]

Fine. There's one confounding variable. But can it account for the entire difference?

French unemployment is significantly higher than the US's, but it isn't nearly as much higher than the difference for youth unemployment.

French minimum wage is in the top 3% of all countries, and is about 50% higher than the US rate. To insist this doesn't leave a mark is making an extraordinary claim -- that charging significantly more for something leaves the demand unchanged. That would require extraordinary proof which seems lacking.

I live in Germany. In Europe, touch screen ordering at McDonalds is universal.

[David Nieporent]

So, what confounding variables are there between France and the US that swamp the far higher minimum wage in France being in a cause and effect relationship with its 3x higher youth unemployment rate?

French law makes it almost impossible to fire people. Which makes it much more costly to hire people. And since young people don't have a track record, it's even riskier to hire them.

[JesseAz]

In the short term. Go look at Seattle and what it did to min wage employment.

[Pacific]

And there's no liberty like the liberty to work for less.

[DjDiverDan]

Would you prefer the liberty to be unemployed and not be able to feed your children? One of the common failings of leftists (and bad economists) is that they never ask the question "As compared to what?" If these prospective employees had the option to get a better job and earn more, they would never take a minimum wage job, or a job that paid less than the "prevailing wage". The fact that they are willing to accept such employment is a pretty strong indication that it is their best available option. You compassionate leftists would rather they starve?

[NToJ]

You say this flippantly but the experience of human history is that economic competition, which very much includes threatening to "work for less", has improved the human condition immensely. As long as the competition is not coercive, the liberty to work for less is a restatement of the liberty to work, or the liberty to engage in commerce on agreeable grounds with others. That's real liberty.

[NToJ]

Also, the "liberty to work for less" is almost always going to more efficiently allocate finite resources than central planning. The cheaper the labor, the cheaper the goods or services being sent out to the public. It's not just the employer/employee who benefit.

[D-Pizzle]

I was going to write that res ipsa doesn't apply here, but upon further reflection, I think you may be right. After all, his ignorance does speak for itself, although his Ph.D. probably comes from a Ph.D. mill.

[Jerry B.]

"I'll do you one better. Since I have a Ph.D. in economics, I know that unions excluding black workers from membership is racist. Forbidding black workers from being paid less than whites isn't."

[Jerry B.]

Keyboard not acting good. I'll try again

"I'll do you one better. Since I have a Ph.D. in economics, I know that unions excluding black workers from membership is racist. Forbidding black workers from being paid less than whites isn't."

How about unions systematically excluding blacks from membership, and then having laws written so that pretty much only union labor employing companies have a chance at government contracts, thereby preventing non-union black employing companies from competing?

[Martinned]

Yes, which is why civil rights legislation should require unions not to discriminate on the basis of race just like it should employers.

[D-Pizzle]

"Yes, which is why civil rights legislation should require unions not to discriminate on the basis of race just like it should employers."

It does, which you would know if you had a JD, instead of hanging your hat on your Ph.D. Maybe I'm piling on a little, but your initial comment really rubbed me the wrong way.

[Rossami]

What your "decades of higher education" seem to have failed to teach you is that as private institutions, unions are allowed to be racist. They shouldn't be racist (and in a few special circumstances, are supposed to be prohibited from racist actions) but in large part, they were and often still are deeply racist. The effect of Davis-Bacon is to allow the government to exploit that third-party racism for its own racist ends while maintaining a pretext of innocence.

Davis-Bacon wasn't about "forbidding black workers from being paid less than whites" - it was about blocking blacks (and other disfavored minorities) from getting opportunities for the jobs at all.

[D-Pizzle]

Wow, what an arrogant prick. Anyway, I have a JD as well as an MBA and an MS in Finance, something I would not have even brought up were it not for your asinine comment. You need to look at the comments below. They are correct, you are not. You Ph.Ds. always think you're the most educated people in the room, and often that is not the case. Next time try a little humility instead of trying to pull academic rank over everyone else.

[JesseAz]

I missed the part where the government set the wages and not the independent businesses. What it must be like to live in a world where you can't make your own choices on emoyment conditions and wages.

You realize it's pretty racist to assume only minority employees don't know how to negotiate wages right?

[NToJ]

It's a disparate impact argument.

[Sarcastr0]

As discussed below, Davis-Bacon was passed with the explicit intent of excluding African American workers from federal construction projects.

Sounds like animus is back on the menu, baby!

[Martinned]

We should make some kind of list. Animus is bad if it's against Christians, but OK if it's against Muslims. Animus against Gays is also bad, unless it's by Christians. Animus against African Americans is TBD, except that animus against African Americans by cops is definitely OK.

[JesseAz]

We should make a list of stupid analogies. I'll add your comment to the list. You seem to have even worse than a facial knowledge of the instances you mention.

[Pacific]

And, on the six month anniversary of the tax "cut", recall that there's no animus like that against unions and higher wages.

[ActualRightWingPatriot]

Labor unions need to be outlawed on a federal level and union agitating made an act of sedition. Further, Congress should strip the federal judiciary the right to hear any cases challenging the Constitutionality.

[General Skarr's Prize Petunias]

You do realize that the first amendment includes within it "the right to peaceably assemble", right? And that if Congress strips the federal judiciary of the right to hear any cases challenging Constitutionality, it has no reason to exist (aka we become a tyranny)? Or are you really that retarded?

[bernard11]

He is.

[Morbo]

I'm starting to think ARWP is the right-wing version of OBL. It's satire/a troll.

[PoxOnBothYourHouses]

Another era heard from.

[rsteinmetz]

Davis Bacon was passed in 1931under the Hoover administration, at a time when blacks began migrating from the south in large numbers. The law was passed to prevent contractors from undercutting local union workers with "cheap southern labor". Construction unions at the time largely barred blacks from membership that pattern continued into the 70's. I can remember being on union construction jobs where the only blacks on the job were laborers and plasterers.

[Rev. Arthur L. Kirkland]

construction unions have been among the most persistently exclusionary institutions in American

As bad as the Republican Party of the most recent half-century?

Didn't think so.

[TwelveInchPianist]

Meh. If you believe that there is structural racism that benefits whites, and you support a high minimum wage or other constraints on the labor supply, then you may as well just put on the hood and go to the rallies.

[DjDiverDan]

"Didn't think so."

In your case, Rev., the last word in that sentence was unnecessary and misleading. When you post, I thionk most of us just assume that you didn't think. Many of us are convinced that thinking is an activity completely foreign to your experience.

[Rev. Arthur L. Kirkland]

You think I'm a hopeless, godless, sappy Commie.

I think you're a bigoted, backward, authoritarian goober.

Guys like me are the reason disaffected cranky old guys like you mutter bitterly about all of this damned progress, tolerance, and reason.

[D-Pizzle]

"I think you're a bigoted, backward, authoritarian goober."

Don't you ever tire of this shtick. I know we do.

[SimonP]

Arthur, don't distract from David's concern trolling.

[JesseAz]

Concern trolling. Stated when you refuse to think about the negative effects of a policy you prefer. Generally used by people too ignorant to have even a remedial conversation on policy with. Concern trolling.

[ReaderY]

Professor Bernstein has made this point before, and much of it is valid. The progressives were racists. The Wilson administration enforced segregation in the federal government and permitted negros to be employed only in the lowest-level jobs. And many policies that they enacted that are today seen as liberal were motivated in no small part by racism. This included policies supporting unions. The unions of the day were generally whites only. So excluding non-union labor excluded non-white labor.

That said, I'm not sure that it is reasonable for a court to apply these principles lock, stock, and barrel to today's unions. After all, taxes enacted to support schools, build bathrooms, etc. a century ago were doubtless enacted to support segregated schools, bathrooms, etc. But I don't think that original motivation makes them invalid as support for today's schools (etc.)

I think the situation here is similar. The law on its face is neutral, and today's unions don't have the same segregation issues.

[DjDiverDan]

Your reply is valid IF AND ONLY IF you reject disparate impact as a valid theory of racial discrimination. While the Davis-Bacon Act may well be "neutral on its face", it still has a disparate impact on laborers with less skill or experience, and will disproportionately adversely affect minority populations. So, are you willing to reject disparate impact arguments?

[ReaderY]

My reply addressed the discriminatory intent prong, and is valid independently of the disparate impact question.

[Stephen Lathrop]

DJDiverDan, seems like your argument makes sense only insofar as you can show today's labor unions exclude blacks and other minorities. It isn't the job of unions to mitigate every disparity in the American economy, and especially not to trim their own sails with an eye toward those other mitigations principally in mind. Unions' job is to do the best they can by their members?and let society at large worry about society's problems. If blacks, etc., have an equal chance to be union members, all that other stuff about disparate impacts has to be saved for a different debate with a different focus. And I think it should be, and the debate should be had. I wonder if you think so too.

More generally, I suggest the reason this style of argument appeals to Bernstein and fellow-traveling conservatives is exactly because it pretends (however illogically) to shift from society at large its responsibility for an onerous social ill, and assign that responsibility instead to a target the conservatives dislike for other reasons. That's not only not logical, it's not forthright. Also, easy to see through, and not at all persuasive.

[DjDiverDan]

"DJDiverDan, seems like your argument makes sense only insofar as you can show today's labor unions exclude blacks and other minorities."

No, that is false. Even if today's labor unions admit blacks and other minorities freely and without any discrimination, that leaves open the issue of the rates of education, skill level, and experience open to blacks and minorities. And disparities in those characteristics will result in disparities in the value of those persons to employers. A poorly educated, low skilled, or inexperienced worker can still be of value to an employer, but not enough value to justify a high minimum wage, or a union-fixed "prevailing wage." Just because a low-skilled or poorly educated black can join a union doesn't mean the union shop employer must hire that union member if that member can't work productively enough to justify the contracted for wage rate. There is no union contract ANYWHERE in the country that removes from employers the discretion as to which employees to hire. So no, making the unions open to membership by disadvantaged black and minority workers does NOT eliminate disparate impact. You haven't thought through the problem.

[NToJ]

"...seems like your argument makes sense only insofar as you can show today's labor unions exclude blacks and other minorities."

Davis-Bacon doesn't have anything to do with unions. Unions could be super awesome not-racists today, but prevailing wage laws still disproportionately result in higher minority unemployment. Davis-Bacon often-times applies in non-union states (on public jobs, for example).

"...to shift from society at large its responsibility for an onerous social ill..."

Minimum wage laws apply to non-union workers, too. Why don't you just address the argument that they are racist (in their effects)?

[mydisplayname]

Before agreeing with you in part, I'll disagree in part: Davis-Bacon does indeed have something to do with unions. Through Davis-Bacon, we the government effectively empowered a perpetual nobility -- unions -- to establish the minimum wage rates for occupations of interest to that nobility itself, thereby diminishing our own ability to respond to the needs and wishes of our fellow government participants.

You are correct that Davis-Bacon and other minimum wage laws apply both to union and non-union workers: Davis-Bacon is uniquely onerous in that it has the effect of allowing a non-elected perpetual nobility (a union) to foist its will on _all_ workers, union and non-union alike. If a prevailing union has the whim to levy an outrageous price for its services, that whim has priority over the will of workers who wish only to demand a reasonable price for their services: the nobility's whim may even have the effect of arbitrarily increasing the price of public contracts, thereby having the effect of levying a tax increase on the public at large.

[NToJ]

I don't think this is true anymore (if it ever was), though. Davis-Bacon doesn't necessarily set the prevailing wage at union rates.

[NToJ]

"...let society at large worry about society's problems."

How do minimum wage laws even do this? By shifting the cost of society's problems to (1) employers; (2) their customers; and (3) the unemployed workers they create? If it isn't unions' job to mitigate every disparity in America, why is it (1) or (2)'s job? And why should (3) be the one paying the most for it? It's not just wrong, it's cruel.

[mydisplayname]

I agree that virtually all minimum wage laws, including Davis-Bacon, are racist by design: Milton Friedman's 1966 Newsweek OpEd ("Minimum Wage Rates") contains a concise history. And how can we forget that the 1967 expansion of federal minimum wage laws precipitated what the New York Times (in 1968) described as the "Negro Exodus" from America's farmland.

It is cruel, but expedient: minimum wage laws have the effect of forcing those unable to earn an honest wage (albeit at a lower wage rate) to rely upon handouts metered by politicians to whom the dependents are then beholden. There is no way to reform the "social safety net" before reforming minimum wage laws... and since minimum wage laws are, at least in part, controlled by a perpetual nobility, there is no way to reform minimum wage laws. Neat, tidy, cruel... and permanent.

[Stephen Lathrop]

NToJ, your argument to union workers amounts to this:

You, not everybody, but you, have an obligation to ameliorate the condition of America's poor people. You must not do the best you can for yourself, because doing that would not maximally commit resources you command to your obligation of amelioration. An obligation, keep in mind, that is yours alone, and not shared by, for instance, employers, or business customers.

You need a more workable principle. I suggest this: if solving social problems requires money, society must prioritize getting the money. And the only way to mobilize money for solving problems is to get the money from people who have money.

Let that guide policy about ameliorating the lot of the poor, and you won't find yourself uttering nonsense about special obligations of union workers to take care of everyone.