In its contempt for the market, the federal government is setting high wages that keep people poor.
On government construction jobs, federal law requires that everyone be paid "the prevailing wage." By "prevailing wage," the feds mean the wage the bureaucrats were prevailed upon to set. The Davis Bacon Act, passed in 1935, requires every construction worker be paid exactly what the bureaucrats decree.
The real "prevailing wage" is set by the law of free exchange, of course: If you don't pay enough, no one will work for you. Demand too much, and you won't get much construction work. Supply and demand make sure people are paid a wage that's most efficient for the most people.
The Davis Bacon Act redefines the term "prevailing wage." For the facts of the market, it substitutes the arbitrary whims of bureaucrats. But the facts are the facts, and ignoring them is never safe. In this case, the victims of the government's self-deception are the people the government is refusing to see: the people for whom the real prevailing wage -- the amount they can earn on the open market -- is lower than that set by the government.
Under Davis Bacon, the government issues wage edicts that are different in every town. The wage rates are based on a complicated formula that supposedly averages previous union and non-union wages in a given town. But, of course, the union contractors, because they're organized, are more likely to get their wage data to the government, so the averages are skewed.
Construction had long been the kind of work where young people could break in by helping, watching and working cheap until they acquired skills. The Davis Bacon Act eliminates that.
When Chicago decided to repair the Cabrini Green housing project, people who lived in the project assumed such a big job would provide work for the unemployed young men who grew up there. But because of Davis Bacon, every contractor had to pay high salaries -- even for the simplest jobs. So contractors, locked into paying high salaries, were not about to take a chance on beginners. They hired the most experienced union workers they could find. They used workers who would "normally never come near our neighborhood," said aspiring construction worker John King. "I think it's wrong that they do that. We want to provide. We're not just derelicts and drug dealers and thugs."
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