We are today facing an economic slowdown, I believe we can all agree on that simple fact. While each of us has an opinion as to whether government can effectively create jobs, there is no question that we all wish to have our tax dollars spent wisely. During President Obama’s first term, there has been much debate over the veracity of the jobs created/jobs saved figures. That is not the purpose of this article.
Working as a purchasing agent in the State of California for the last eight years and in the electrical business for the last 15, I have extensive experience with the issues facing owners in the electrical construction business. While working in the wholesale segment I learned the maximum profit I could extract from the contractor, while still retaining their business. As a supplier, I found myself conflicted between attempting to generate a profit for my employer and maximizing customer satisfaction, which included pricing which allowed them to generate a profit as well! It was an incredibly cutthroat business, where the difference between getting an order and not sometimes amounted to as little as $1,000 on a $50,000 order. The way we competed was generally on service level. The customer’s deadline became our deadline! With lead times and other uncontrollable factors impacting our ability to perform, sometimes it was rather difficult to achieve goals that were set. Working well into the evening several nights in a row in order to meet deadlines was not unusual. This caused a great number of “butting heads” moments between myself, management and sales staff. I NEVER missed a deadline. But that isn’t the purpose of this article either.
The purpose of this article is to discuss the labor rate charged for government funded programs throughout this country. In the contractor segment of the electrical business, I have been exposed to what is referred to as the “prevailing wage”. It is not unique to the electrical business, but it is central to the differences between private and public projects in this country. The driving factor is the Davis-Bacon Act of 1931. When passed, it was designed to stop minority non-union labor from being able to “unfairly” compete with higher paid white workers. While today it is hard to comprehend such an Act passing, it was reality in the 1930’s. However, as with so many other regulations, today the Davis-Bacon Act has consequences unintended when passed. It determines wages paid to any worker that participates in a federally funded project. Despite my personal belief that quality should come first and be the primary driver for wages, Davis-Bacon makes quality irrelevant. Davis-Bacon guarantees the “prevailing wage” will be paid on federal construction projects, meaning wages must follow union scale in any area that is at least 50 percent unionized, regardless of the quality of work. A personal example may help to illustrate why Davis-Bacon needs to be repealed.
I live in what is considered the fruit basket of the world, the San Joaquin valley in central California. Pick your crop folks, we grow it! Almonds, tomatoes, artichokes, lettuce, asparagus, walnuts, cherries and yes premium wines and table grapes. The packing sheds out here hire an incredible number of legal (and illegal) immigrants. People line up by the hundreds to secure jobs with these facilities – you would be stunned!
Not long ago, one of the sheds needed to build a cherry line in order to meet increased demand. As it was a privately-owned company that received no public funds, they were not required to pay the prevailing wage on the project. It was a massive undertaking and one of our best electricians was assigned the job. As the “parts guy”, I was involved from the beginning and listened to the electrician lament how it was a private job and that he wouldn’t be paid prevailing wage. We billed $60 per hour and paid the electrician approximately $35; a prevailing wage job would have billed at $85 per hour and paid the electrician $55. He reluctantly agreed that the lower wages were better than not working at all, and I predicted that by the time he finished the job he would be taking pictures and crowing like a proud new father! The job took 6 months of 40+ hour weeks and overtime was paid. Needless to say, by the end of the project he was there with video camera in hand, displaying how the line worked! He had indeed become a “proud poppa” crowing over his newborn child.
The point of this post? I guess that in looking for ways to cut government spending, the Davis-Bacon prevailing wage statute may not be a bad place to start. From my experience, the majority of contractors working in this field started by slinging tools themselves and they know what it’s like to try to eek out a living. There is plenty of work available for all contractors without entrenching the businesses that choose to become union shops. With both state and federal governments trillions of dollars in debt, isn’t it time to reintroduce the free market into our bidding process?