Service Contract Act and Davis-Bacon Act Under Attack

By David Madland and Karla Walter
Posted on June 27, 2017, 11:45 am

The federal government spends hundreds of billions of dollars annually contracting out goods and services, including building highways, employing janitorial services in federal office buildings, and hiring security at nuclear laboratories. Prevailing wage laws-such as the Davis-Bacon Act of 1931 and the McNamara-O’Hara Service Contract Act of 1965-help ensure that this spending does not drive down local wage and benefit standards; that businesses providing good jobs can compete; and that taxpayers get good value for their money.

Unfortunately, prevailing wage laws are under attack and could be repealed by this Congress. Several bills have been introduced to eliminate these long-standing laws, and reports indicate that these provisions could be attached to must-pass bills such as appropriations or defense authorization legislation. Despite his claims to be a pro-worker president, President Donald Trump has not committed to supporting these laws. Repealing prevailing wage laws would cut the wages of millions of workers and their families and ultimately cost taxpayers dearly.

The Davis-Bacon Act applies to workers on federally supported construction contracts, while the Service Contract Act applies to service workers on federal contracts. Both laws ensure that workers on government-funded projects are paid the going market rate-or the prevailing wage-based on surveys of wages and benefits for occupations in each local market. This helps standardize wages across an industry and ensures that government spending does not drive down market wages. In areas where there are a number of high-road firms-firms that treat their workers well-and market wages and benefits are high, the prevailing wage helps support good jobs. In areas where market wages are lower, the prevailing wage is also generally lower. Yet no matter the condition of the local labor market, prevailing wage laws help ensure that the federal government doesn’t undercut local standards.

Without these standards, the government purchasing process could cause wages in the market to spiral downward: This is because the government frequently awards contracts to the lowest bidder, which gives a natural advantage to those companies that pay their employees the least. This is especially true because of the federal government’s significant purchasing power. In many cases, the federal government is the largest buyer by far in the market, with the power to set the rate for goods, services, and labor. As a result, government spending could lower wages for workers throughout the private sector.

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