This Labor Day, Celebrate Your Local Flagman

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A few weeks ago I was charging along on U.S. 50 in West Virginia, enjoying the state's great August weather during a brisk, twisty ride up a mountain on my motorcycle. Then east of Aurora I turned south onto WV 24 and soon encountered a flagman stopping traffic for highway repair work. I was the sole motorist there for a while and it didn't take me long to dismount from my black Honda ST1300 and strike up a conversation with the flagman.

She was an attractive young lady, friendly too, an undergrad at WVU. After a few minutes of conversation, ice appropriately broken, I asked her what she made at her job. Somewhat embarrassed, she answered, "$35 an hour." "Wow, that's incredible," I responded. I blurted out u2018incredible' as anyone might, even though I knew right away why she was overpaid. It's called the Davis-Bacon Act. In the absence of this intervention, of course, her market wage for performing such unskilled work would have been more like $12 an hour. Any responsible, able-bodied adult could immediately and competently perform her job of talking into a walkie talkie and turning the sign from "STOP" to "SLOW" and back again. Oh yes, some days she drove the "FOLLOW ME" pick-up truck too.

My dear wife was none too happy to hear what the flag(wo)man made. Pat exclaimed, "But I'm responsible for the lives of all these patients!" Well, I guess the flagman could reply that she's responsible for highway worker and motorist safety too, but does anyone see these responsibilities and skills demanded as comparable? Pat is an RN who graduated from a prestigious Philadelphia nursing school back in 1967, earned a bachelor's degree in business at a small West Virginia college in the 1990's (salutatorian), and held many responsible positions in nursing over the years. She currently works part-time as an RN for a nursing home chain in Arkansas, traveling the state as necessary and earns $28 an hour with few fringe benefits, most prominently two weeks paid vacation annually. RNs average $33 an hour nationally and $69,000 per year.

Residents of the mountain state earn only about 80% of U.S. median or mean hourly wages, and average under $18 per hour across all occupations. West Virginia is saved only by Mississippi from being the lowest income state. In Preston county WV, home of highway 24, the average resident's weekly pay is $704 while nationally average pay across all occupations and industries is $955. The lovely coed flagman would make $1,400 per 40-hour week, twice that of the typical wage earner in Preston county and considerably above average national pay too.

The Davis-Bacon Act was passed in 1931 after a sharp decline in construction activity at the beginning of the Great Depression. The law requires that workers on federally financed construction be paid wages at "local prevailing rates" for comparable construction jobs. The clearly stated intent was to protect local workers from competition (horrors! competition! be gone!) by migrant workers and contractors. Many contractors and building trades unions welcomed monopoly protection from what one congressman declared "carpetbagging sharpie contractors."

The ambiguity and virtual impossibility of determining what exactly is the "prevailing" wage rate for each occupation has allowed the U.S. and state departments of labor (like WV) administering their little Davis-Bacon Acts to fix minimum rates at union wage rates in about half of its wage determinations. Government-determined wage rates sharply compress the wage structure compared to market rates too. In Preston county WV, for example, federal construction wage minimums range from $37 per hour in wages plus fringes for Class 3 Laborer, which includes flagman, to $48 per hour for certain power equipment operators and $49 per hour for electricians at the top of the "labor aristocracy" level. Even the West Virginia Division of Labor imposes a rate of $30.58 for a flagman in Preston county. Don't ask what the Davis-Bacon labor rates are in New York City. OK, just double those in Preston county WV and you will be close.

A wide variety of groups including the Government Accounting Office, The New York Times, the U.S. Chamber of Commerce, Associated Builders & Contractors, and many economists have urged repeal of the act(s). Construction workers are among the highest paid in America although only about 20 percent of all construction work is regulated by Davis Bacon and the parallel state governments' "little" Davis-Bacon acts. Ten states have repealed their little Davis-Bacon acts and eight states never had one.

Among the deleterious effects of governmental overpricing labor is sharply boosted cost of building and maintaining "infrastructure" including schools, streets and highways, ports, and airports, probably 30 percent more expensive, thereby ripping off taxpayers; reduced employment among unskilled and low skilled labor; shriveled "stimulus" impacts of government spending; and jobs and income transferred from local contractors and their employees to organized labor and unionized contractors. Davis Bacon also discourages minority contractors, most of whom are nonunion, from bidding on government contracts, contrary to government policy aimed at favoring minority enterprises.

Happy Labor Day!

Morgan Reynolds [send him mail] is professor of economics emeritus, Texas A&M University, and a former chief economist in the U.S. Department of Labor. Visit his blog.

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