August 22, 2023
You can bet we haven’t heard the last of the inflation beast.
And it’s not just thanks to the recent uptick in filling your tank…
It’s from another great example of how economic “industrial policies” — like Bidenomics — kill economies…
Check it out…
Kamala Gives America a Raise!
Earlier this month, Veep Kamala made the announcement…
“Many workers are paid much less than they deserve, much less than the value of their work,” Harris said. “And not just by a little. In some cases, by thousands of dollars a year. And that is wrong.”
“We are updating this law and giving workers across the nation a raise.”
The law she’s talking about is the Davis-Bacon Act. Passed in 1931, it mandated that workers employed by contractors and subcontractors who work on federally funded projects must be paid the local prevailing wage.
Now what exactly is the “local prevailing wage?” Well, prior to 1982, the prevailing local wage was considered the highest wage paid to at least 30% of workers in an industry. The smaller that sampling gets, the higher the prevailing wage is likely to be (and ironically the less “prevailing”)..
In 1982, President Reagan changed the definition to the wage paid to at least 50% of workers — in other words, the average.
This raise that Kamala has promised is the result of switching back to the old way of calculating the prevailing wage — with a twist. The Department of Labor can now determine a prevailing wage based on input from state and local governments instead of surveying contractors which would give a more objective wage base. The arrangement also allows for a lot of political monkey business. Like using urban labor numbers to set rural pay scales.
The Biden cheerleaders were, naturally, delighted.
Actual Contractors Have a Different Opinion
A representative for Associated Builders and Contractors said:
“This is yet another Biden administration handout to organized labor on the backs of taxpayers, small businesses and the free market,” said ABC Vice President of Regulatory, Labor and State Affairs Ben Brubeck.
Of course, he represents the industry. What’s he going to say?
But the GAO doesn’t think it’s a good idea either. According to the WSJ:
A 1979 report from the Government Accountability Office noted the law (at the 30% threshold) “is inflationary and results in unnecessary construction and administrative costs.”
And the Journal points out another interesting point where this legislation goes (my emphasis):
The Inflation Reduction Act includes “bonus” tax credits that are five times larger for renewable projects that pay the prevailing wage. Because most aren’t profitable without the bonus credits, nearly all green-energy developers could have to pay the prevailing wage. That means the law may cost even more than the $1.2 trillion that Goldman Sachs estimated.
The White House has admitted (bragged, actually) that the change is going to impact a LOT of federal spending.
These numbers will continue to grow given that nearly all of the significant construction programs contained in President Biden’s Bipartisan Infrastructure Law, CHIPS and Science Act, and Inflation Reduction Act require or strongly incentivize the use of Davis-Bacon prevailing wages.
So There You Have It…
The government spends money it doesn’t have…
To entice businesses into areas that are not profitable…
With legislation that forces their costs higher…
Putting upward pressure on wages/inflation!
Another triumph of industrial policy!
Humbly yours,
Tim Collins
Editor, Streetlight Daily