Thursday, September 22, 2005
With Friends Like These...
New Orleans' black underclass doesn't need any enemies. Matthew Yglesias and Josh Marshall are singing the praises of the Davis-Bacon Act and excoriating the President for considering suspending it in regards to reconstruction for Katrina. For those of you who are unaware, Davis-Bacon mandates that any federal contractor on a construction project be paid "prevailing wage rates". This has long been established as union scale. The one issue you won't find either of them coming within 10 miles of in their discussions is race. You see, economists, pretty much across the board have long recognized that the burden for Davis-Bacon falls inordinately on black people - specifically on the black underclass.
You might ask why. Well, the reason for it is pretty simple. By definition, the underclass has limited education, limited work experience, and limited connections. That's basically why they're the underclass. But, ask anyone who's ever worked in construction. This isn't the description of a union construction worker. It takes years of experience and arm-twisting a lot of connections to get a union card. Once you get it, you're golden. You get a big pay hike over your rate as a non-union construction worker. Unfortunately, there is a pretty well-documented racial discrepancy between union and non-union construction workers. Whether this results from racism or simply the much larger labor supply within minority groups for non-union construction work, I'll leave for others to haggle over. The point is that does exist. More strikingly, the non-union construction labor force tends toward the disadvantaged within the minority population. Again, kind of a tautology.
Davis-Bacon sets a price floor on construction labor. It says that construction work for the government can only be compensated at the union scale. But the construction labor market, like any other labor market, isn't really a single price market. In an open market, employers trade off between price and certainty. The union labor, while more expensive, comes vouched for in terms of experience and standards. As a result, both ends up being consumed in the marketplace. On the other hand, if you say that you have to pay employees the union rate, the incentive to hire non-union employees pretty well vanishes. Why, after all, would you take a gamble on someone, when you've got a known commodity with the union guys.
The racial implications of this policy weren't some sort of unintended consequence. They were actually the entire point of the law. During the migration of black people Northward in the 1930s, emerging unions actively sought to exclude them from the market. Consider the following:
In normal practice, this elevates the wages of union labor and depresses the wages of non-union labor (All of the non-union labor that would have been hired for government work is now chasing after the same non-union customers.). In the aftermath of Katrina, however, this effect will likely be magnified. Pretty much the entire construction market in that part of the country has been flooded out, and anyone moving to do any construction would be likely to consider treating it as recovery. But, the overwhelming amount of recovery work is going to be done through the government. This will mean that the role of the government in supporting union wages will be more pronounced, but the depressing effects will also be magnified.
If they get their way on this matter, and Davis-Bacon remains in effect in Katrina recovery, I predict that within a few months we'll hear either Yglesias or Marshall beating their breasts sanctimoniously about racism in the reconstruction effort. I've little doubt that they'll use the accusation to suggest racism is symptomatic of America, and that we as a country are little removed from cross-burning rednecks. The least one can expect is that they refrain from sewing the hoods and buying the gasoline.
New Orleans' black underclass doesn't need any enemies. Matthew Yglesias and Josh Marshall are singing the praises of the Davis-Bacon Act and excoriating the President for considering suspending it in regards to reconstruction for Katrina. For those of you who are unaware, Davis-Bacon mandates that any federal contractor on a construction project be paid "prevailing wage rates". This has long been established as union scale. The one issue you won't find either of them coming within 10 miles of in their discussions is race. You see, economists, pretty much across the board have long recognized that the burden for Davis-Bacon falls inordinately on black people - specifically on the black underclass.
You might ask why. Well, the reason for it is pretty simple. By definition, the underclass has limited education, limited work experience, and limited connections. That's basically why they're the underclass. But, ask anyone who's ever worked in construction. This isn't the description of a union construction worker. It takes years of experience and arm-twisting a lot of connections to get a union card. Once you get it, you're golden. You get a big pay hike over your rate as a non-union construction worker. Unfortunately, there is a pretty well-documented racial discrepancy between union and non-union construction workers. Whether this results from racism or simply the much larger labor supply within minority groups for non-union construction work, I'll leave for others to haggle over. The point is that does exist. More strikingly, the non-union construction labor force tends toward the disadvantaged within the minority population. Again, kind of a tautology.
Davis-Bacon sets a price floor on construction labor. It says that construction work for the government can only be compensated at the union scale. But the construction labor market, like any other labor market, isn't really a single price market. In an open market, employers trade off between price and certainty. The union labor, while more expensive, comes vouched for in terms of experience and standards. As a result, both ends up being consumed in the marketplace. On the other hand, if you say that you have to pay employees the union rate, the incentive to hire non-union employees pretty well vanishes. Why, after all, would you take a gamble on someone, when you've got a known commodity with the union guys.
The racial implications of this policy weren't some sort of unintended consequence. They were actually the entire point of the law. During the migration of black people Northward in the 1930s, emerging unions actively sought to exclude them from the market. Consider the following:
The comments of various congressmen reveal the racial animus that motivated the sponsors and supporters of the bill. In 1930, Representative John J. Cochran of Missouri stated that he had "received numerous complaints in recent months about southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South."[15] Representative Clayton Allgood, supporting Davis-Bacon on the floor of the House, complained of "cheap colored labor" that "is in competition with white labor throughout the country."The Davis-Bacon Act: Let's Bring Jim Crow to an End ; Cato Institute
In normal practice, this elevates the wages of union labor and depresses the wages of non-union labor (All of the non-union labor that would have been hired for government work is now chasing after the same non-union customers.). In the aftermath of Katrina, however, this effect will likely be magnified. Pretty much the entire construction market in that part of the country has been flooded out, and anyone moving to do any construction would be likely to consider treating it as recovery. But, the overwhelming amount of recovery work is going to be done through the government. This will mean that the role of the government in supporting union wages will be more pronounced, but the depressing effects will also be magnified.
If they get their way on this matter, and Davis-Bacon remains in effect in Katrina recovery, I predict that within a few months we'll hear either Yglesias or Marshall beating their breasts sanctimoniously about racism in the reconstruction effort. I've little doubt that they'll use the accusation to suggest racism is symptomatic of America, and that we as a country are little removed from cross-burning rednecks. The least one can expect is that they refrain from sewing the hoods and buying the gasoline.
