NCPA - National Center for Policy Analysis

Davis-Bacon Act Results In Racial Inequities

November 1, 1995

Some people have a "taste for racial discrimination," according to Gary Becker, a Nobel laureate in economics. In a competitive market, employers usually find that indulging such a taste is costly, resulting in lost income - except when government fixes the price of labor. Setting wages above the market price allows prejudiced employers to discriminate without paying the economic penalty that comes from drawing on a smaller pool of workers.

An example is the Davis-Bacon Act, which requires contractors on federally financed construction projects to pay workers the "prevailing wage," usually that of unionized workers and often twice the nonunion wage.

Before Davis-Bacon passed in 1931, employment of blacks in construction trades was rising relative to whites in 38 states outside the South, but afterward the trend reversed.

  • Employment in construction trades rose 31.5 percent overall from 1910 to 1920 - 31.3 percent for whites and 46.5 percent for blacks.
  • Between 1920 and 1930, employment rose 23.5 percent overall - 22.9 percent for whites and a whopping 65.5 percent for blacks.
  • However, between 1930 and 1940, while construction jobs overall declined during the depression by 21.7 percent and by 21.6 percent for whites, black employment declined the most, by 24.9 percent.

Davis-Bacon-type laws apply to 27 percent of all construction in the United States, enough to slow progress in black construction employment relative to other occupations:

  • In 1930, blacks were employed in construction crafts at 31.5 percent of their proportionate share of the whole population, and by 1990 were at 70.4 percent of their proportionate share - still 30 percent below the expected "color-blind" rate.
  • However, in six nonconstruction trades in which blacks had only 13 percent of their proportionate share of jobs in 1930, by 1990 they held 125.5 percent of their share and were thus overrepresented by 25.5 percent.

The difference between black and white unemployment rates in construction occupations grew from 1.2 percentage points in 1930 to nearly 2.5 points in 1940, 3.9 points in 1980 and an estimated minimum of five percentage points in 1990. This differential is partly due to the discrimination unintentionally fostered by Davis-Bacon.

 

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