The rise in construction prices thus has generally exceeded the advance in most other industrial sectors by a substantial margin. This is due principally to the fact that wages of construction workers have been rising more rapidly than those of other industrial workers while improvement in construction practices and techniques has lagged seriously.

While construction activity has been expanding steadily with the exception of the downturn during late 1966 and early 1967, the supply of skilled workers has not kept pace. Entrance requirements and apprenticeship rules in some construction unions have not been adequately adjusted to the requirements of a rapidly growing economy. For this and other reasons, the bargaining strength of unions in the construction industry is generally strong. At the same time, the resistance of contractors to high wage demands is reduced by the fact that construction contracts are generally let by bid, with all contractors in a given area operating under the same wage scales. During 1967, this bargaining strength was reflected in the annual wage increases of 8 per cent or more provided in a number of important construction settlements.

At the same time, changes in construction techniques which would improve productivity and afford at least a partial offset to rapidly rising wages have been slow in coming. This has been especially true in many urban areas where standards are rigidly controlled under local building codes. These codes originally intended to protect the public against inferior design, materials, and workmanship have been slow to adjust to the opportunities afforded by new materials and methods. They have thus retarded the advances made possible by developing technology and have preserved high-cost techniques.

Both the smaller specialized contractors and the construction trade unions have resisted changes in these codes. The latter have been especially opposed to changes in the allocation of work among different categories of craftsmen and to the use of prefabricated parts.

The CHAIRMAN. We have one more witness, Mr. Robert T. Thompson, director and member of Labor Relations Committee, Chamber of Commerce of the United States.

Mr. Thompson, we will be very glad to hear from you at this time. Your statement will be printed in full in the record. You may present it as you see fit.

STATEMENT OF ROBERT T. THOMPSON, DIRECTOR AND MEMBER OF LABOR RELATIONS COMMITTEE, CHAMBER OF COMMERCE OF THE UNITED STATES, ACCOMPANIED BY OTTO F. WENZLER, LABOR RELATIONS MANAGER OF THE NATIONAL CHAMBER

Mr. THOMPSON. If I may, it is a short statement, I would like to read it. The CHAIRMAN. Very well.

Mr. THOMPSON. Of course, I would be delighted to answer any questions.

I am Robert T. Thompson, a labor attorney with Thompson, Ogletree & Deakins of Atlanta, Ga., and a member of the Labor Relations Committee of the Chamber of Commerce of the United States.

With me is Otto F. Wenzler, labor relations manager of the national chamber. We are here today to express the business community's support of two bills, S. 3654 and S. 3373.

The national chamber is the largest federation of business and professional organizations in the United States, and is the principal spokesman for the American business community. We represent 3,600 trade and professional associations and local chambers of commerce, and we have a direct membership of more than 40,000 business firms and an underlying membership of more than 5 million individuals and

HISTORY OF DAVIS-BACON

The Davis-Bacon Act became law on March 3, 1931, for the avowed purpose of insuring the use of local wage standards on Federal construction projects. The legislation's sponsors, Senator Davis, of Pennsylvania, and Representative Bacon of New York, among others, sought to prevent the Federal Government from being an instrument for deflating or inflating wage rates on these construction projects. Since that time, many witnesses have appeared before several congressional committees seeking the amendment of the act in order to make it more equitable to those contractors who have to pay wage rates according to determinations made by the Department of Labor. We have supported these moves to reform Davis-Bacon. On the other hand, nearly 8 years ago during hearings before the House General Subcommittee on Labor, both government and union witnesses maintained that no legislation was needed. They claimed that the Department of Labor was going to make some necessary administrative changes which would correct the recognized problems. But it is clear that inequities of the act continue. A 1971 report by the General Accounting Office, based primarily on the effects of Davis-Bacon in federally financed housing, showed that the minimum wage rates established by the Department of Labor were actually running 5 to 15 percent higher than the true prevailing wages.

NEED FOR REFORM

In view of the persistent problem of inflation and the extreme measures which have been taken in the last year to combat it, it is difficult to understand the Government's continuing endorsement and maladministration of this law which is acknowledged to inflate wages and prices in the construction industry.

The national chamber supports full repeal of the Davis-Bacon Act or, in the alternative, a renewed suspension of the act under section 6. The factors behind the President's suspension of the prevailing rate provisions under this authority of the act in February 1971, still exist. To be sure, the President's message accompanying the suspension of the Davis-Bacon Act plainly admitted that the act was a major contributor to inflation in the construction industry. The President said:

. . . under the Davis-Bacon Act, wage rates on federal projects have been artificially set by this law rather than by customary market forces. Frequently, they have been set to match the highest wages paid on private projects. This means that many of the most inflationary local wage settlements in the construction industry have automatically been sanctioned and spread through government contracts.

The Davis-Bacon Act was originally passed in 1931 to ease extremely severe downward pressures on wages in the construction industry. I believe, however, that this preferential arrangement does not serve the best interests of either the construction industry or the American public at a time when wages are under severe upward pressures.

You will recall that the suspension of Davis-Bacon was shortlived. It was reinstated by proclamation of the President on March 29, 1971, although anyone could see that the serious root causes leading to suspension could not have been cured in such a short time. Even more obvious is the fact that the reasons for enactment of the Act in 1931 have long since vanished and there is no justification for the existence

of the act with or without the mechanism that was established simultaneously with the reinstatement, the Construction Industry Stabilization Committee.

But assuming that the establishment of the CISC justified reinstatement, which we do not concede, the suspension of Davis-Bacon was "No longer required" only because the CISC was to provide, in the words of the President, the procedure for achieving "an equitable stabilization plan" in the construction industry. Again assuming in arguendo that this hypothesis was valid, has the CISC achieved the objective assigned to it by the President? We think not.

The condemnation of the committee's track record has been widespread. No less an authority than the president of the United Steelworkers of America, I. W. Abel, has publicly stated that "many of the Nation's construction workers are getting pay increases far in excess of Federal wage guidelines." While still on the Pay Board, Mr. Abel wired the Chairman of the Pay Board, Judge Boldt, stating:

The magnitude of these increases approved by CISC for construction appears to go beyond the size of the increases the Board majority is prepared to approve in other industries. Such a double standard patently is indefensible, the Pay Board cannot in good conscience impose tough restraints in industry generally while condoning much looser standards in a particular sector of the economy. Only last week the Bureau of National Affairs' biweekly survey of contract settlements reported that the median negotiated wage gain for the first 22 weeks of 1972, excluding construction agreements, was 21.9 cents per hour. The report showed that the median wage gain in construction through this period was 59.7 cents per hour. Wages in the construction industry plainly remain under severe upward pressures!

To make it perfectly clear, the responsibility of Congress is to repeal Davis-Bacon outright.

So, it goes without saying that we strongly support Senator Tower's proposal, S. 3654, which takes an important first step by repealing provisions of the National Housing Act and the United States Housing Act of 1937 which require prevailing wage determinations under Davis-Bacon. These acts cover such diverse Federal construction and federally assisted construction projects as nursing homes, rental housing for veterans and housing for low-income families.

The application of Davis-Bacon in these critical areas achieves the perverse result of defeating the intent of these Federal programs. Prof. Yale Brozen of the University of Chicago cites the actual case of a developer of a high rise apartment complex to be built in Prince Georges County, Md. After building two such apartments, the developer received an interest cost subsidy to build a third for "moderate income" families. In order to receive the subsidy, however, the builder was required to pay Davis-Bacon wage rates. He argued that if he were to pay these higher wages, the rentals on the new "moderate income" building would be higher than those in the two apartments already built. Before the developer's objection was dealt with by the Wage Appeal Board, a new determination was made by the Wage Determination Division that further raised the minimum wage rates and eliminated any hope of building the "moderate income" housing.

CONCLUSION

The Congress has been well-informed on the inflationary and wasteful effects of the Davis-Bacon Act through the unimpeachable reports

of its own agent, the Comptroller General of the United States. The Congress and the public are well aware of high construction wages and resulting exorbitant construction costs. This, gentlemen, is a true consumer issue. It is time the Congress acted and a first step is passage of S. 3654.

The thrust of S. 3373, introduced by Senator Brock, is toward solv ing the same problem that is addressed by S. 3654, the high cost of housing. It, too, is a consumer issue. The boycott of advanced and sophisticated construction methods and materials made necessary by archaic building codes and restrictive work practices help to serve only the special interests of some construction union members at the expense of the consuming public, and in some cases the union members themselves.

IMPLEMENTATION

S. 3373 seeks to combat inflation in the construction projects carried out under the authority of the Department of Housing and Urban Development, and to simultaneously promote productivity in these programs. This bill would not, however, risk the safety and health of those workers or occupants associated with the building.

S. 3373 would allow any person, including the builder, to challenge the enforcement of any code, work practice, or collective bargaining agreement provision that restricts the use, in the construction industry, of new and advanced methods or materials. This challenge is effected by the aggrieved party petitioning the appropriate U.S. district court to enjoin the forced application of that local law or practice. Those restrictions which are based on safety and health precautions would prevail; those that prove to be unrelated to safety and health would be prohibited.

Congressional concern over those construction restrictions which have been forced on the public by irresponsible work practices goes back as far as 1947. In that year Congress enacted the Taft-Hartley Act and section (8) (b) (4) (A) of the act outlawed secondary boycotts designed to force one employer to cease doing business with another. In 1953, the case of Joliet Contractors Association v. NLRB (202 F.2d 606) supported the intent of Congress by holding that a labor collective bargaining agreement banning the use of prefabricated materials constituted a violation of the Taft-Hartley Act because it dictated that a relationship could not be maintained between a contractor and a supplier of advanced building materials.

Having failed in these approaches to using more up-to-date construction materials, labor unions promoted "hot cargo" clauses which forced an employer not to handle products that were made by nonunion employees or were made by an employer who was allegedly unfair to unions. Congress responded again and, in 1959, enacted the Landrum-Griffin Act. Section 8(e) of the act declared such clauses illegal but the construction industry was given an exception on work that was to be done at the construction site. The NLRB properly interpreted the exemption as not applying to work done away from the site which could have been done at the job site. Unfortunately, some court decisions have ignored the intent of Congress and broadened the construction exemption to include most situations where the "object" of the suspect clause is to preserve union work. This is true even

where these clauses force the discontinuance of business relationships between contractor and supplier.

So today, the following kind of practice is all too common. In a western State, the Painter and Decorators Union refuses to allow the use of prefinished cabinets and doors which would cost 50 percent less than onsite finishing. In fact, a restrictive work rule requires that these be brush painted although, in fact, spray painting would be 25 percent faster and of a higher quality. While provision is made for union permission to spray paint, in practice this permission is seldom if ever granted.

Advances such as the use of plastic plumbing pipe, prefabricated walls with windows already installed at the manufacturing plant, and other similar innovations, give the contractors and ultimately the public the opportunity to buy housing at a lower cost. The National Association of Home Builders has 15.000 families who are eligible to obtain mortgages on that house. It is incumbent upon Congress to allow these people an opportunity to purchase this housing instead of aiding those who, for unjustified and selfish reasons, put it out of reach of buyers.

CONCLUSION

We agree with Hunter P. Wharton, president of the International Union of Operating Engineers, who recently called on his members for improved productivity. This legislation is one method of insuring productivity improvement and providing lower cost housing in a relatively short period of time.

As with passage of S. 3654, enactment of S. 3373 would be a first, important and necessary step forward. S. 3373 would at least see that the taxpayer would not be underwriting continued extravagance in the construction carried out under HUD programs.

The CHAIRMAN. Thank you very much, Mr. Thompson.

Senator Tower?

Senator TOWER. I have no questions, Mr. Chairman. I think this is a very comprehensive and well prepared statement, and I think it covers virtually all the arguments that have been presented here today, in favor of this legislation.

I would like to thank Mr. Thompson for appearing.

The CHAIRMAN. Senator Brock?

Senator BROCK. Just a couple of questions. You were here and heard the testimony of the Under Secretary of Labor, Mr. Silberman. Do you agree with his statement that the Construction Industry Stabilization Committee is solving the problem of wage rates in the construction industry?

Mr. THOMPSON. Senator Brock, I would disagree with the statement. I think that the figures that were put forward by the Under Secretary are subject to question.

I do not question his integrity in putting forward those figures, but the only source I have been able to find for such figures is the CISC itself, and I understand, and I read in the news media, that even the people on the Cost of Living Council have had difficulty in verifying those figures.

If you look at the figures that we have presented, it would indicate that their figures alone show better than a 10 percent increase in construction settlements in the last 22 weeks.