cases, rates have been based on union rates in a city which was not even in the state in which the work was to be done. The case cited above of the use of Washington rates in Virginia illustrates this. St. Louis, Missouri rates have been imported into Illinois and Chicago, Illinois rates into Indiana. As a result of imported rates, local labor and local contractors in rural areas and small towns lose jobs to contractors from outside their areas. Davis-Bacon minimum wage rates in Western Pennsylvania, for example, are based on the Pittsburg construction union scale. Last year, the common labor rate was set at $5.14 an hour ($4.74 per hour plus $0.40 in fringe benefits) for areas in depressed Appalachia in which the prevailing was for common labor was $2.25. As a consequence, local contractors did not bid for water, sewerage, and school projects. The wage scale forced on them for these projects would have made it impossible to compete for nongovernmental projects. The contracts went to union contractors from outside the area. They imported their own crews instead of using local labor, THE NEGATION OF PURPOSES OF OTHER FEDERAL PROGRAMS BY THE Because of Davis-Bacon minima set in violation of the stipulations in the act, federal subsidies for projects in Appalachia frequently have not served to increase the job available to local workers. Instead, they have provided jobs in Appalachia for workers imported from Pittsburgh. This, of course, increased the scarcity of construction workers there and drove rates up further there. As one consulting engineer from Somerset, Pennnsylvania, lamented, "The local laborer, out of his $2.25 per hour wage, must pay higher water and sewer service charges resulting from construction costs inflated by outside labor unions. His taxes are increased to pay for other projects including schools to better educate his children. We must import union contractors, thus depriving the local worker of an employment opportunity. He can't win for losing." In the President's January budget message, he proposed spending $975 million for rural community development. With the funds going to projects subject to Davis-Bacon minima, the result will be less work for rural labor. Also, less community development will occur than could be purchased if local labor were used. More work will be provided for construction tradesmen imported from large cities, the scarcity of journeyman in those cities will grow worse, and construction costs in major cities will escalate despite the scandalously high levels already attained. The consequences of the Davis-Bacon Act determinations will be d reduction in the amount of development spurred by Federal funds in rural areas and, in some areas, joblessness for some rural residents who would have had jobs in the absence of the provision of Federal funds. The Davis-Bacon Act also negates the effect of Section 221 D4 of the National Housing Act. The purpose of the section is "to assist private industry in providing housing for low and moderate income families and displaced families." It offers subsidies to reduce interest costs in projects serving such families. Any project built with these subsidies must pay construction workers the minimum rates set by the Secretary of Labor. The net result of the Secretary's wage determinations for these projects is that the subsidy is largely consumed in paying higher rates to construction workers. As a consequence little benefit emerges for the families who were presumably to be assisted by Federal subidization of interest costs. An illustration of this result is provided by a proposed high rise apartment to be built in Prince Georges County, Maryland. The developer of the project, after completion of one high rise apartment and while in process of building a second one, received an interest cost subsidy to build a third high rise for moderate income families in the same project. Along with the interest cost subsidy came a set of Davis-Bacon minima to be paid. The bricklayers whom he was paying $5.80 an hour were to be paid a minimum of $6.50 plus fringe benefits on the moderate income building. Carpenters whom he was paying $4.50 were to be paid $6.09 plus fringes. Electricians who were being paid $4.50 had their minimum set at $6.85 plus fringes. Laborers whose pay was $2.50 were to be paid $4.395 plus fringes. The builder objected that these rates would force an increase in rentals by $30 per month. If he were not allowed to pay his current rates, the rentals in the subsidized building would be higher than those in the two buildings he had already built in the project. He further objected that the rates set were based on those found in commercial construction and were not those paid by builders of high-rise residential structures. Before his objection was acted upon by the Wage Appeals Board, a new determination was made by the Wage Determination Division. The old one had expired. New rates were set even higher than the previous minima. The previous $6.50 minimum rate for bricklayers was raised to $7.10. The $6.09 rate for carpenters was raised to $6.49. The $4.395 rate for common laborers was raised to $4.82. The $6.50 rate for sheet metal workers was raised to a $7.50 minimum. Any hope of making low rent apartments available for moderate income families went glimmering. These examples of the effects of Davis-Bacon determinations offsetting the intended purposes of much Federal legislation could be multiplied many fold. The contractor for the Madison Community Hospital, to be built with HillBurton and local matching funds in South Dakota, found the minimum rates set for the job exceeded what he had been paying by amounts ranging from $0.10 an hour for laborers to $1.26 an hour for sheet metal workers. The rates set for a project at Fremont, Michigan under the Housing for the Elderly Program caused a local contractor to withdraw his bid of $93,000. They increased the cost to $135,000, the best bid that could be obtained from a nonlocal contractor, all local ones having refused to bid if they had to pay the minima set by the Secretary of Labor. The project was abandoned. A Methodist church group proposing a home for the aged at Walnut, Iowa, with the assistance of HHFA funds, found itself saddled with Council Bluffs (part of the Omaha, Nebraska metropolitan area) union rates, which were used to set minimum wage rates for the construction of the home. It abandoned the project. A Federally-aided low-rent housing project in Atlanta, Georgia had Davis-Bacon minima set at levels runnings from $0.80 an hour more than was paid in private construction for laborers to $1.65 an hour more for electricians. A low-rent project in Cullman, Alabama had Davis-Bacon minima set initially which averaged 62% higher than local rates. The wage decision used Birmingham negotiated rates though Birmingham was fifty-five miles away. A Manpower Training Program in construction trades has been made neces sary by the Davis-Bacon minima and simultaneously has been partly nullified by the minima. Davis-Bacon minima have been set for apprentices and trainees on Federal and Federally assisted projects at about 70% of journeyman rates. Since trainees work slowly compared to trained journeymen, their output is only about 50% as great. Much of their work has to be redone. The amount of supervision required to teach and to check work is much greater than with trained journeyman. On the average, a trainee's net output is worth about one-fourth that of a journeyman. With a minimum wage at 70% of a journeyman's wage, contractors are reluctant to hire trainees on Federal jobs. The production of skilled journeymen is restricted, causing scarcities which force up construction wage rates. The Manpower Office has financed the training of construction workers to offset the scarcity and to provide opportunities for minority group members. Davis-Bacon minima are set for these training programs, however, since they are Federally funded. In a Gary, Indiana program, the minimum for carpenter trainees taking part in the program is $6.00 an hour. As a consequence of this high rate, the funds allocated to the training program are consumed in paying high wage rates. Very few trainees are graduated relative to the funds expended, although large numbers of applicants have indicated that they would be eager to enter the training program at $3.44 an hour. Many more minority workers could be trained with the available funds if the Davis-Bacon minima were not set at the $6.00 an hour level for trainees. DAVIS-BACON EFFECTS ON UNION RATES Because of the Wage Determination Division presumption that union rates should be used to set minima in its wage determinations, construction union negotiators have become increasingly intransigent insisting upon large increases in negotiated rates. They know that whatever rates are set, they will be paid on Federal and Federally-assisted construction. Federal projects currently come to almost 30% of total construction. The number of jobs available at union rates in private construction has declined because of the high levels rates have reached. The wage rates extorted on Federal projects compensate, in part, for this decline. Union members are taking more and more nonunion jobs to offset the decreasing employment opportunities. In many areas where union rates have reached the eight and nine dollar level, members are working on nonunion jobs at four to five dollars an hour when no union jobs are available. For many types of construction in many centers, only union members at union rates are used even though their financing is not Federal or Federally assisted. As costs have been forced up, the result is the cancellation of projects which could serve their communities well, but inordinately high costs make them impossible. If there were no Davis-Bacon program forcing the payment of union rates on Federal projects, rates would not have been pushed to the levels which have killed many private projects. Unemployment in the construction trades would not have reached its current level. Current spending for construction is at near record levels, but current employment is not. Eleven percent of construction workers are unemployed. Unions, with Davis-Bacon incentives, have over-priced their members to the point where construction dollars buy so little that record spending does not result in record employment. 80-741 O 72 27 |