When contractors pay bad wages, the public shoulders the burden

President Joe Biden’s tenure has been marked by a relentless focus on creating good jobs for working Americans. In addition to the record 7.9 million jobs created during his time in office, he recently signed into law the Infrastructure Investment and Jobs Act (IIJA), which will create hundreds of thousands of new jobs and sustain millions more. The United States urgently needs more high-quality jobs, and the administration has also taken several steps to boost wages such as by raising the contractor minimum wage to $15; increasing equity and access for workers from all walks of life; and holding accountable corporations that violate workers’ rights.

Now, the Biden-Harris administration is updating regulations governing the Davis Bacon and Related Acts (DBA) to ensure that workers on construction projects that receive federal funding are paid fairly. While the draft rules may be overlooked by some, they will improve the lives of 1.2 million workers; ensure local, law-abiding contractors can compete on an even playing field; and help guarantee that IIJA investments and other government spending provide a good value to the public.

DBA protections — which require recipients of government contracts, loans, grants and other types of government spending to pay their workers local, market wages and benefits — apply to approximately $217 billion in construction spending per year. In addition, the vast majority of the infrastructure law’s investments include prevailing wage protections.

Research shows that strong construction wage protections allow workers to earn middle-class incomes; expand access to health insurance and pension plans; and increase homeownership rates. These standards also help close wage gaps between Black and white construction workers and, when paired with other interventions supported in IIJA such as local hiring requirements, increase recruitment of historically marginalized groups to good jobs in the construction industry.

In other words, prevailing wage laws help create the sorts of jobs that are essential to a healthy American middle class but are currently in short supply. For example, recent analysis from the Economic Policy Institute finds that while net productivity grew by nearly 62 percent over the past four decades, average hourly pay for the typical worker increased by just 17.5 percent.

Yet, existing federal prevailing wage standards are woefully outdated. The typical American worker was still in preschool the last time these regulations were updated. Moreover, Reagan-era changes weakened the law’s ability to support working people by divorcing wage determinations from actual market pay. And today, weak enforcement tools result in wage theft that can reduce a misclassified construction worker’s total compensation by approximately 29 to 36 percent.

When low-road contractors beat out law-abiding contractors based on low and even illegal wages, the public shoulders the burden. Weak prevailing wage protections increase Americans’ reliance on assistance programs like the Supplemental Nutrition Assistance Program (SNAP). And recent research from the Center for American Progress finds that nearly 30 percent of contractors with the worst records of workplace law violations also have significant performance problems on subsequent government contracts — including submitting fraudulent billing statements; falsifying qualifications for contract employees; accruing major cost overruns; and producing defective and sometimes dangerous equipment

The DBA draft regulations would uphold fair treatment of working people by ensuring wage determinations are updated more frequently, keep pace with inflation and better reflect the actual wages most widely being paid in local communities. Moreover, the regulations will improve compliance with the law by increasing remedies for workers that are illegally fired or otherwise retaliated against for reporting violations and ensuring that the worst violators are barred doing business with the federal government.

Indeed, after Maryland increased contracting wage standards, bids for government contracts increased by nearly 30 percent. By modernizing DBA standards now, the federal government will encourage more law-abiding companies that respect their workers and the public to compete for contracts and help guarantee that new IIJA investments create the good jobs that the American economy so desperately needs.

Karla Walter is the senior director of Employment Policy at the Center for American Progress.