Thursday, September 22, 2005

Davis - Bacon

In the aftermath of Hurricane Katrina George Bush suspended the Davis-Bacon law that requires Federal contractors to pay the prevailing wage when operating in any part of the country. Under that law a company contracted by the Federal Government to remove debris from New Orleans would have to pay workers the prevailing wage in order to receive and keep the Federal contract. With that law suspended they are free to pay less than the prevailing wage. Matt Yglasias and Mickey Kaus have been discussing the merits and demerits of suspending this law with a nice summary and comments by Kevin Drum.

I concur with Matt on characterizing Kaus' argument as "policy literalism" what I tend to see in some of these arguments of ignoring secondary effects of one's policy. Consider these two points:

1) Does paying a higher wage not decrease the number of people looking for public housing by increasing the number of people able to afford private housing. Yes, we might build fewer units given the higher cost, but how many more units do we need because the wage scale has been depressed. If that number is larger, we are operating less efficiently, Mickey Kaus notwithstanding. See this link from Josh Marshall

2) Efficiency of government. I'm not convinced of the loss of efficiency of government agencies compared to the private sector. It is well documented that Medicaid is considerably more efficient than is private insurance. While it is certainly true that one can find aspects of government operation that are less efficient, due to some of these rules, it is not clear that government is across the board less efficient. I'm reminded of reading about the adoption of the 40-hour work week. It was widely thought that for industrial processes having the additional shift would hurt productivity. (Understand that prior to the 40-hour week the standard was 84 hours, 7 12-hour days). However, the reduction in accidents and work stoppages due to workers being less afflicted by sleep deprivation actually resulted in an increase in productivity. I suspect that some of these rules actually increase the efficiency of the operation.

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At 11:55 PM, Blogger MSR said...



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