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Using federal power to improve Americans' jobs

By Katrina vanden Heuvel

President Obama is rumored to be considering -- the horror! -- of using executive power to do something about wage stagnation in America. I say more power to him.

Obama wants to draw on an old American tradition of improving the jobs of workers in firms from which the government is buying goods or services. Most countries do this. We’ve done it ourselves. It’s a no-brainer. As a market participant buying products and services from the private economy, the government has every legal right to put whatever wage or health standards it wants on those selling things to it. It also has an obligation to “promote the general welfare,” not just welfare for the investment bankers. And doing so might begin, even in a small way, to shore up the middle class that’s taking a beating the past 30 years.

But instead of cheering this move, critics of common-sense steps such as these are pushing for the roll-back of similar measures already in place. Take my fellow PostPartisaner Charles Lane, who wrote a pungently-titled post, "Another jobs-killer that needs repeal," calling for the rollback of the Davis-Bacon Act, which requires employers to pay the "prevailing" local wage on federally-funded projects. Lane's post is an anti-labor polemic, similar to those drafted by people who argue that raising the minimum wage will lead employers to hire fewer workers.

Lane and those who agree with him fail to note that prevailing-wage laws don't prevent new job creation during times when, for example, the construction industry is flush and building is booming. You only have to look at the surge in home construction employment during the housing bubble period of 2002 to 2007 to see that. But Davis-Bacon does ensure that high-skilled workers are paid a good wage and that contractors the government employs aren't hiring unskilled people to drive their costs down and win the bid. Such practices would give us shoddier construction and higher insurance premiums that could be passed along to consumers.

Too often opponents of wage or labor standards recycle stale arguments -- taking cues from operations such as the Beacon Hill Institute and the U.S. Chamber of Commerce -- about how they hurt taxpayers. Among the things they don’t mention is that fairly-paid workers will be better able to support themselves and stay off public assistance. (Many low-wage employees of federal contractors receive Medicaid and food stamps.) Lane fails to reference studies conducted by the Department of Housing and Urban Development and academic researchers that show such workers have greater productivity and reliability. And what about the larger goal of ensuring that America rebuilds a robust middle class, which would contribute to the economy and boost job demand overall?

And Lane’s premise -- that prevailing wage laws have crippled the job-creation measures in the stimulus package -- is ludicrous when you consider the history of the New Deal. Sure, back in the early 1930s, Harry Hopkins and the Roosevelt Administration fought with the construction unions about how to balance prevailing wages with the need to put a lot of unemployed people to work very quickly. But they reached compromises on wages and local employment requirements, and they put millions to work on public infrastructure and other construction projects without getting rid of such laws.

There's an important role for responsible capitalism in our society. The White House's proposed plan is good for "high-road" businesses that are already paying a decent wage to their workers. It means less competition from their "low-road" colleagues, who make their profits by sweating labor and externalizing every possible cost they can -- health insurance, environmental stewardship, taxes. If putting new standards on procurement dollars means making life a little easier for workers and a little harder for the firms that treat them like road kill, great.

By Katrina vanden Heuvel  | March 5, 2010; 7:30 AM ET
Categories:  vanden Heuvel  | Tags:  Katrina vanden Heuvel  
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economic illiteracy on parade

Posted by: ringo2 | March 5, 2010 9:03 AM | Report abuse

Hey Katrina, why don't we have the government impose a minimum wage of a million dollars? Then we'll all be rich!

Posted by: sold2u | March 5, 2010 10:13 AM | Report abuse

The more something costs the less we buy of it. We can see that with gasoline and with and so many other things we buy. Why can't we see it with employment? Prevailing wages laws, living wage laws, minimum wage laws, whatever you want to call them all have the effect of increasing the cost of employment. They kick some of the least fortunate members of our society off the bottom of the economic ladder. The best thing Congress could do to help the working poor is to repeal them.

Posted by: DavidDenholm | March 5, 2010 4:05 PM | Report abuse

What a strange proposition Ms. vanden Heuvel is offering here: The governmet should build weath by concentrating public construction money on fewer, rather than more, construction workers and therefore by completing fewer construction projects. She thus implies that government should pay a laborer $70,000 a year to do odd jobs on a project when it could get more work done, and provide employment and relief from poverty, by employing two laborers at half the wage. As for "research" showing that workers who are paid the prevailing wage are more productive than workers who are not, it should be obvious that if contractors really get more bang for the buck by paying higher wages, they will figure that out themselves without being compelled to pay more by government. Particularly silly is the idea that the 16% of construction workers who belong to unions should determine the wages paid to the 84% who do not and who are who denied jobs so that the 16% can enjoy above-market wage rates. That's the illogic here. And she conveniently forgets that the principal motivation behind the Depression-era prevailing wage law was to deny employment opportunities in northern cities to poor Southern blacks who were accused of "stealing" jobs from white workers. One wonders how enthralled with the unions this writer must be to igjnore these and other facts.

Posted by: dtuerck | March 6, 2010 10:45 AM | Report abuse

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