September 12, 2005

Nothing can salve the wounds like money  

Bush has removed pay scale regulations in order to better deal with the national emergency:

The Davis-Bacon Act, passed in 1931 during the Great Depression, sets a minimum pay scale for workers on federal contracts by requiring contractors to pay the prevailing or average pay in the region. Suspension of the act will allow contractors to pay lower wages. Many Republicans have opposed Davis-Bacon, charging that it amounts to a taxpayer subsidy to unions.
This might make sense in some other contexts, but when such a huge geographical area is hit and residents are likely going to be doing their own rebuiling, doesn't it just penalize the victims? No doubt the effect will be to discourage residents from returning.

I'm having a hard time understanding the logic here, especially when it goes against the smart (if almost distastefully political) strategy outlined near the end of this article. Maybe the move is predicated on the assumption that rebuilding contracts will be filled by out-of-town contractors? Either way, it seems like a large political error -- either it misses a great opportunity to get local people involved in the reconstruction and allow them to benefit from the contracts, or it takes from the pocketbooks of local workers. I suppose the explanation is probably more ideological than anything else, an attempt by Bush ("we're problem-solvers") to cut through bureaucratic red tape right when the perception of the federal buereaucracy is worst. Unfortunately, Bush's idea of red tape is the regulations that protect the very people who were harmed here.

(I don't claim to have a sophisticated understanding of Davis-Bacon, but critics who claim it prevents the government from getting fair market price on labor are confused. The obvious problem addressed by the Act is that the government can use its enormous size and status to use extort lower wages than would be otherwise possible in a market setting. The Act addresses this problem by requiring the government contractors pay the "prevailing average pay" in a region -- ie a labor price that has been set by the market.)

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