Davis-Bacon prevailing wage laws increase construction costs: even Washington, DC government knows it

New Mexico is a “Davis-Bacon” state. Such laws require that workers who are hired for public works projects are paid a prevailing wage which is equal to collectively bargained union wages. This regulation holds despite the fact that only 8.7 percent of private-sector construction workers in New Mexico are union members. By negating the merit system which was used by 92 percent of the construction industry, the law places wage setting power among the 8 percent who do use collective bargaining agreements.

Economically speaking, this is a form of price fixing which pushes out competitors who are willing to work for lower wages. The federal Davis-Bacon law (1931) is estimated to raise costs to taxpayers by 15 percent on federally funded projects. It is believed that New Mexico’s law increases the cost of school buildings, roads, and transit projects by similar rates (other studies such as this one from Columbia University indicate the markup is 30%).

Believe it or not, even the “died-in-the-wool” liberal Democrats in Washington, DC government are concerned about the costs of “Davis-Bacon” prevailing wage laws to the point that they are suing Obama’s Department of Labor.

Which states are saving money by repealing their “prevailing wage” laws? Check out the map below:

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