Capital Commerce: Paying up to get the work done after Katrina
The withdrawal of Harriet Miers's nomination wasn't the only retreat by the White House last week. President Bush also gave back a little something to workers in the Southeast by announcing he would reimpose federal rules, which had been suspended in areas affected by Hurricane Katrina, that set high minimum wages federal contractors. The decision, which will affect all federal contracts awarded after November 8, was a blow to businesses hoping for cheap labor but a victory for an unusual alliance of unions, Democrats and moderate House Republicans.
Bush's reasoning when he suspended the law, known as the Davis-Bacon Act, was that reducing bureaucracy and letting contractors pay less than the prevailing local wages should speed up and lower the cost of cleaning up the hurricane's mess. The logic seems indisputable. But the reality has turned out to be very disputable. Some of the biggest contractors, such as Halliburton, insisted they and their subcontractors would continue to pay their workers at the federal standard anyway, eliminating any chance of savings. Also, labor turned out to be in such short supply in the weeks after the disaster that most employers couldn't find locals willing to work for low wages. Even now, almost two months after the hurricane hit, one energy firm, Baton Rouge-based Turner Industries, can't find enough unskilled laborers willing to work for $15 an hour, plus benefits, housing, food and a per diem bonus to pay for extras, says Stephen Toups, vice president of administration. A few contractors did import low-priced labor from Texas and other areas, but there was no clear evidence they were passing those savings on to taxpayers.
Meanwhile, some of those contractors were taking advantage of workers and the government. Reports were starting to trickle in of undocumented Hispanic workers being lured to Louisiana and Mississippi, working for a few weeks, and then being underpaid or abandoned without being paid at all.
Critics of the Davis-Bacon Act insisted that the abuses were not caused by the suspension. If given more time, the suspension would have produced significant savings for taxpayers, they argued. But Rep. Frank LoBiondo, a New Jersey Republican, led a group of moderate conservatives lobbying for the reinstatement by arguing that more of the $62 billion in federal reconstruction money should go to the locals who had lost their jobs and homes in the storm, rather than imported lower-wage workers. "We had the facts on our side," LoBiondo says. The logic of simple-sounding economic theories, it seems, didn't take into account the hard facts of today's messy and complicated labor market.
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