There has been considerable discussion about the corporate tax system in the U.S. and the IRS’s global reach in the media over the past year. The rash of corporate inversions was the catalyst for the public discussion of...
- The Tax Policy Blog
- President Obama to Sign Executive Order to Increase Minim...
President Obama to Sign Executive Order to Increase Minimum Wages Paid by Federal Contractors
Just hours before tonight’s State of the Union address, President Obama announced he will sign an executive order increasing the minimum wage paid by federal contractors from $7.25 to $10.10. The order affects wages paid under any new or renewed contracts.
The politics of this move are obvious—the president wants to build momentum to raise the national minimum wage - but this is unfortunate due to the disportionate negative impact of minimum wage laws on minority groups.
One of the first federal laws requiring federal contractors to pay “prevailing” wages on public works projects was the Davis-Bacon Act of 1931. The law was intended by its sponsors to discriminate against contractors using African-American and migrant workers, and it likely still affects minority hiring even today.
The original Davis-Bacon Act was drafted in 1927 by New York Republican Congressman Robert Bacon after an Alabama contractor won the bid to build a federal hospital in Bacon's district. As Bacon stated in the first hearing on the bill, "The bid... was let to a firm from Alabama who brought some thousand non-union laborers from Alabama into Long Island, N.Y., into my congressional district." What Bacon was hinting at was that many of the workers were black, and willing to work for less than local building tradesmen.
The debate on the bill took matters beyond hinting. When the final bill was debated on the House floor on February 28, 1931, Alabama Congressman Miles Allgood argued for the Act, stating: "That contractor has cheap colored labor... and it is labor of that sort that is in competition with white labor.. . This bill has merit... [and] it is very important that we enact this measure."
In 1932, just one year after the bill’s enactment, only 30 of the 4,100 workers employed on the Boulder Dam project were African-American. In 1962, two years before the landmark Civil Rights Act was passed, local construction unions in Washington, DC, prevented black electricians from working on one of Congress’s own office buildings: the Rayburn House Office Building.
Not only do such laws freeze out minority workers, they cost taxpayers billions more than is necessary—all to make an ideological point. The Congressional Budget Office estimates that repealing the Davis-Bacon Act could save taxpayers as much as $2 billion per year. The White House has not revealed how much today’s executive order will cost taxpayers, but its impact will be far more than monetary.
Update (2/12/14): President Obama signed the executive order into law today.
 Scott Alan Hodge, “Davis-Bacon: Racist Then, Racist Now,” The Wall Street Journal, June 25, 1990. http://thomas.loc.gov/cgi-bin/query/F?r103:1:./temp/~r103DH9Ax8:e3880:
Subscribe to the Tax Foundation Newsletter
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.