Biden Approves Construction Worker’s Salary Revisions on FFP

The Biden administration has recently finalized a decision to increase salaries for over one million construction workers involved in federally funded and aided projects. The revisions made to the Davis-Bacon and Related Acts are expected to have a really big impact on the workers’ earnings.

Revised Wage Regulations and Worker Benefits

Vice President Kamala Harris also highlighted that the adjustments to the Davis-Bacon and Related Acts will lead to a boost of “thousands of extra dollars per year in workers’ pockets.” The move will help a lot in improving the financial well-being of construction workers and provide them with fair compensation for their efforts.

Business Associations’ Concerns

Despite the positive intentions, several business associations have also expressed some concerns over the new regulations. The Associated Builders and Contractors (ABC) and the Associated General Companies (AGC) argue that the changes come at a challenging time for the construction industry. They emphasize the high costs of materials, heavy equipment and a shortage of skilled labor, which they believe could negatively impact the industry’s financial stability.

Revisions Amid Industry Challenges

Representatives from ABC and AGC note that the construction industry is currently facing financial difficulties due to soaring materials costs and a shortage of skilled labor, with over half a million vacant positions in 2023. They argue that the changes could burden the already over-regulated construction contractors and may even undermine taxpayer investments in infrastructure.

First Update in 40 Years

The revisions to prevailing wage laws mark the first substantial changes in over four decades. Initially proposed in March 2022, these updates reflect a modernization of the compensation determination process, impacting the salaries of construction workers engaged in federally supported or assisted projects.

Shift in Prevailing Wage Rate

Under the new regulations, construction projects covered by President Biden’s Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act will require payment of locally prevailing salaries and fringe benefits. The prevailing wage rate will now align with the wage paid to at least 30% of workers in the area, as opposed to the previous requirement of 50%.

Biden Administration’s Rationale

The Biden administration asserts that the revised formula increases the likelihood of workers receiving the appropriate prevailing wage rate. By basing the rate on a lower percentage of local workers’ wages, the administration is hoping to ensure fair compensation for all the employees.

Critique from Business Associations

The ABC cites a study conducted by the Beacon Hill Institute in May 2022, which suggests that the Davis-Bacon Act raises construction project costs by at least 7.2%. They claim that this results in an another annual burden of 21 billion dollars on the taxpayers and inflates wages for construction workers by 20.2 percent above local market averages.

Department of Labor’s Role

To maintain accurate prevailing wage rates, the Department of Labor currently conducts surveys among contractors and other relevant parties. The final rule empowers the DOL’s Wage and Hour Administrator to adopt local and state-set prevailing wages, make wage determinations for labor classifications with insufficient data, and modernize outdated wage rates.

Call for Data Accuracy

AGC urges the Department of Labor to focus on improving data accuracy to identify genuinely prevailing salaries. They emphasize the importance of gathering precise information to develop accurate wage determinations that reflect the actual construction labor market.

Missed Opportunities for Improvement

Stephen Sandherr, CEO of AGC, also had some criticism for the final rule for not adequately addressing the wage determination process. He believes that the rule could have improved this process by incorporating more data-driven methods, which would have provided better clarity and quality in construction projects.

Enforcement and Worker Protection

The new regulation includes anti-retaliation language in contract terms to strengthen enforcement. This clause makes it possible for the Department of Labor to withhold funds from contractors, ensuring compensation for employees who raise concerns and protecting them from retaliation.

Differing Perspectives on the Final Rule

Ben Brubeck from ABC views the final rule as a handout to organized labor at the expense of taxpayers and small businesses. He believes the DOL missed an opportunity to make reasonable changes that would have led to accurate wage determinations and affordable high-quality projects.

Union Support and Original Intent

Sean McGarvey, president of building trades unions, praises the final rule for strengthening federal prevailing wage regulations. He believes that the revisions bring the law back to its original intent after decades of dilution. McGarvey sees this decision as beneficial to both union and non-union workers, responsible contractors, and taxpayers.

Implementation Timeline

Following publication in the Federal Register, the new regulation is set to take effect after a 60-day period, marking a notable change in the way construction workers are compensated on federally funded projects.