engaging in this kind of practice, that it is almost deliberately discouraging black participation in this particular industry.

Mr. AHART. I think they have revised the regulations to try to cure that particular problem.

Senator BROCK. Well, of course, you say you have not been able to evaluate the effectiveness of those regulations.

Mr. AHART. That is correct.

Senator BROCK. There was one other apparent inconsistency here. You say early in fiscal 1971, 1972, resurveys of wage rates on residential construction resulted in minimum wage rates being lowered in 19 cases by an average of 35 percent.

Now, that is an action of the Department in response to your recommendation.

How does that jibe with your earlier statement that the misapplication of Davis-Bacon had resulted in increases of only 5 to 15 percent? There seems to be some dichotomy here.

Mr. AHART. The two bases are not comparable, Senator. The 5 to 15 percent which I mentioned in my statement as a result of our reviews was of the total construction costs. The percentages on the wage base, itself, would have been considerably higher than that. The Department's percentage is on the basis of the wage determinations themselves.

Senator BROCK. Now, I have forgotten the exact figure, but you say, there are thousands-was it 12,000

Mr. AHART. About 27,000 at the present time.

Senator BROCK. Here, you have only 27 resurveys. Is that adequate? Mr. AHART. No; and I believe the Department recognizes it is not adequate. They have a program underway as I understand it, that they are trying to carry out as quickly as available manpower will permit to resurvey. This deals primarily with the distinction between residential and commercial wage rates, and they are trying to resurvey those.

I think the last figures I saw, was that they had about 900 resurveys that they felt should be done, but they did not have the manpower to carry them out as expeditiously as they would like.

Senator BROCK. What do you mean when you say you make 27.000 determinations on an annual basis? Is that not a resurvey of the prior years' determinations?

Mr. AHART. Well, I think the distinction is between the survey itself. Senator, and the determination. One survey of a particular area may be the basis for several wage rate determinations, or it may support an area determination for a particular classification, or classifications of employees on a particular kind of construction.

The survey is made to gather the basic data which supports the individual or the area wage determination.

Senator BROCK. How many of those are made a year?

Mr. AHART. I do not know if I have the figure.

Mr. Brown, do you know how many?

Senator BROCK. What was the 27,000?

Mr. AHART. That would be wage rate determinations. I do not know if we have figures on how many surveys or resurveys they may have carried out in a recent period.

Mr. Brown, can you add to that?

Mr. BROWN. The last information that I have was that in the last fiscal year they have surveyed, or made about 1,000 more on-site. surveys, where before, they made very few. So, this is a considerable increase.

Senator BROCK. Well, it sounds to me as if you are almost saying that these determinations are based upon an automatic action that occurs every year without any evidentiary basis.

Mr. AHART. Well, they do have other sources of information. They get information through mail surveys, they get information from contractors, they get information from labor organizations, and in some cases, as I indicated, they are now getting information from the Federal agencies that support the Federal construction.

So, the on-site surveys are not the only source of information. I do have information here, Senator, that was included as part of the Department's appropriations justification in a recent year which shows that the number of resurveys for residential construction in fiscal 1968 was 70, in fiscal 1969, it was 57, they estimated 70 in 1970, and on the basis of getting more manpower, they were hoping to accomplish 500 in 1971.

I do not think they got the amount of manpower that they had requested, and I am not sure what they actually conducted. But, they did estimate at that time, that there should be an additional 925 resurveys to make the distinction between residential and commercial construction.

Senator BROCK. All right. Very quickly. What was their response to your recommendation that they raise the minimum contract cost from $2,000 to $100,000?

Mr. AHART. I do not think they commented specifically on that on the basis of our report. I do not believe they have taken a position on that particular point with us.

Senator BROCK. Did you accept their statement that because they have decentralized their determination process, that the mechanization or computerization of this determination process was in fact, infeasible?

Mr. AHART. We have not evaluated it on the basis of a decentralized operation, Senator, so we have neither accepted nor rejected their position on that particular point.

We will be giving consideration to this, I would expect, in further work in the wage-rate determination area.

Senator BROCK. Decentralized, you still have to sit through the same mechanical process?

Mr. AHART. Basically, the work would be done at the regional office level, as opposed to Washington, although I think the Washington headquarters still gives the final approval of each wage rate determination.

Senator BROCK. Thank you, very much.

Senator TOWER. Thank you, Mr. Ahart.

For the duration of the hearings, you may submit any additional material for the record that you may feel that you should, as a result of some questions that have been pursued here today.

We have a vote on the Senate floor.

I dislike detaining the distinguished Under Secretary of Labor. However, we are required to vote, and therefore, I will have to recess the committee until 10 minutes of 11 so that Senator Brock and I can do our duty. Before we go, let us insert in the record, at this point, a statement received from Congressman Bob Wilson of California: (The statement follows:)

go

STATEMENT OF BOB WILSON, REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Chairman: Housing has become a nationwide cause largely due to efforts by the present Administration to beef up the industry. In 1971, for the first time, we reached 2.6 million units of new housing. This is the level we must maintain over the decade of the 1970's to reach the goal of providing enough good, new housing to take care of our growing population.

Even so, due to rising construction costs, the family with an income of $10,000 or less has been effectively forced out of the new housing market. Federal subsidy programs have helped. However, we in the Congress are becoming concerned about the steep increases in fund dmands-which now are estimated to be heading for the level of $7 billion a year by 1978. This is five times the current payout. The demand for low-income housing is huge. The Department of Housing and Urban Development has a backlog of 500,000 famiiles who are seeking to get into public housing projects. If we are to meet the housing needs of our nation today and in future years, we must change our ways of producing housing— right now.

A ready means to cut construction costs is by applying the new and exciting technology brought to us by the Space Age. Unfortunately, antiquated building codes and restrictive union work rules are barriers to the use of this new technology in modernizing the housing industry.

A number of states have faced up to the problem and enacted factory built housing laws. According to the March, 1972, issue of Construction Review, twenty-one states now have such laws, while legislation is pending in 8 more. I am happy to report that California is one of these. Under the able leadership of then Assemblyman Peter Wilson, now Mayor of San Diego, the California Factory Built Housing Law was passed by the Legislature in 1970. The California and other such laws allow industrialized housing components to meet state standards and thus eliminate the costly requirement that factory-home builders comply with diverse local code provisions. While I am hopeful that these statutes will encourage the use of the new housing technology, a number of problems still exist:

1. Since local inspectors typically retain exclusive control over the manner of installation of the components, they can use this power to require compliance with local code provisions.

2. In certain states, the state-wide codes will be subject to the same union and special interest pressure that has afflicted existing local codes.

3. Because of federal preemption of the field under the various labor acts, state industrialized housing laws cannot touch the restrictions of union work rules on the use of new products.

Restrictive work rules present a real impediment to the new technology in my state where much of the housing industry is unionized. I think the following example of this type of conduct in Southern California will put the problem in perspective:

Members of the Sheet Metal Workers Union refuse to allow prefabricated sheet metal products on the job site unless they bear union labels. Even if the factory-built product is fabricated by members of the Union, the local still will object if the plant is out of the immediate area. As a result, these products must be fabricated at the job site at a substantial increase in cost. In an effort to correct this type of problem, I have sponsored H.R. 3679 that would preclude local codes, laws, ordinances, or locally made labor agreements from restricting the use of the new products and technology. Thirty of my colleagues in the House are co-sponsors.

I am delighted that Senator Bill Brock has introduced S. 3373 and that these hearings have been called. While the mechanics of our two bills differ, our goals are identical. I give my wholehearted endorsement to Senator Brock's bill and

I hope the Subcommittee on Housing and Urban Affairs will give it early and favorable consideration. Without new technology in the housing industry, we will fail as a nation to achieve our national housing goals. And what is more important, we will fail the thousands who so desperately need low cost housing. Thank you for this opportunity to testify on behalf of this important legislation.

RECESS

Senator TOWER. The committee will come to order.

The next witness is Laurence Silberman, the Under Secretary of the Department of Labor.

Mr. Silberman, you may read all of your prepared statement if you choose, or if you choose to give it in summary and have us insert it in the record, we would be glad to do that.

You may proceed any way that you would like. If you would please introduce the gentlemen with you.

STATEMENT OF LAURENCE H. SILBERMAN, UNDER SECRETARY OF LABOR, ACCOMPANIED BY WARREN LANDIS, ASSISTANT ADMINISTRATOR, EMPLOYMENT STANDARDS ADMINISTRATION, AND HAROLD NYSTROM, ASSOCIATE SOLICITOR, DEPARTMENT OF LABOR

Mr. SILBERMAN. Thank you, Mr. Chairman.

First, let me introduce the gentlemen at the table with me. To my left, Warren Landis, Assistant Administrator of the Employment Standards Administration; to my right, Harold Nystrom, Associate Solicitor.

I would just as soon read my statement, Mr. Chairman.
Senator TOWER. That's quite all right.

Mr. SILBERMAN. Mr. Chairman, members of the committee, I am pleased to be with you today to discus S. 3373 and S. 3654. These two bills address difficult and complex problems in the construction industry. Both of these bills represent a desire to make the construction industry more efficient and more economical. Both bills, therefore, have eminently desirable goals, which I endorse.

I have serious reservations, however, about the methods proposed in the two bills to achieve these goals.

S. 3373 is a wide-ranging bill to foster modernization in the construction industry. Under S. 3373, it would be illegal to use any procedure or material in a HUD-assisted construction project that restrained the use of new or improved technology, except where that restraint was necessary for safety purposes.

S. 3654 is, in form, a more limited bill. By its terms, it would repeal the application of the Davis-Bacon Act in FHA-insured housing and public housing programs. In impact, however, it would go far beyond its literal language; its thrust is toward repeal of the prevailing wage concept in Federal construction.

In discussing these bills, I want to start by saying that I share the concern with technological lag and past inflation in the construction industry which prompted the introduction of both of these bills. In the Labor Department, we have been working long and hard with construction labor and management to develop new ways to meet these problems. I believe these efforts are showing tangible results.

We are meeting the problem of excessive wages in Federal construction by stabilizing wages and prices in all construction. We are remedying much of the problem in Davis-Bacon administration by reforming the administration of the Davis-Bacon Act. We are making steady progress in labor productivity by bringing labor and management together in a common effort to keep their industry viable.

The efforts of the Construction Industry Stabilization Committee, the Construction Industry Collective Bargaining Commission, and the recently established, but highly promising, National Commission on Productivity, are all aimed at reform.

"Total victory" we do not claim. But there has been enough success so that our efforts should go into improving the structures we have, rather than embarking upon new ventures in unchartered seas, with an untested map.

It was not so long ago that the construction industry was plummeting toward disaster. Costs-both wages and prices-were going up at an alarming rate.

In 1970, wage increases negotiated in the construction industry were a staggering 15.3 percent; more than twice the rate of increase for factory work.

With the industry in a depressed state, the best interests of labor and management dictated moderation to hold wages and prices down. But the industry was on a treadmill, and it was unable, without assistance to get off.

We supplied that assistance-a gentle nudge, if you will. And the industry has carried the ball since.

On February 23, 1971, the President suspended the provisions of the Davis-Bacon Act, declaring that there was a national emergency in the construction industry and that the Government was not going to contribute to the spiral of wages and prices by requiring payment of inflated wages in its construction projects.

Well, this caused-as some of you may remember-something of a stir, if not a sensation. It was shock therapy, but in its own way it worked. It was not long before everyone was anxious to develop permanent machinery to attack the problems of the construction industry in a more direct and comprehensive way.

This desire became reality on March 29, 1971, with the establishment of the Construction Industry Stabilization Committee-1 month after the Davis-Bacon Act was suspended.

The committee was established. Davis-Bacon was reinstated. And construction wage increases started going down.

From the average increase of 15.3 percent in 1970, wage increases came down initially to 11.1 percent in 1971 and have come down even more dramatically since then.

In the last 8 months, wage increases averaged just 6 percent for the entire industry-5.1 percent if you compute it by the number of employees affected, rather than the number of contracts.

Wages are, of course, only a part of the story. CISC has also dealt with the work rules and premiums which can run up costs as quickly as higher wages and fringe benefits; coffeebreaks, travel allowances, and pay for working at hazardous levels all may have an impact on inflation. When costly new work rules and premiums have been found, the contracts have been returned to the local parties for modification.