In John Stossel’s article yesterday, he recounts a story that illustrates the dangers of artificial wage controls. (Davis Bacon is a federal law that requires construction workers be paid an amount determined by a bureaucratic formula instead of wages determined by market forces.)
When Chicago decided to repair the Cabrini Green housing project, people who lived in the project assumed such a big job would provide work for the unemployed young men who grew up there. But because of Davis Bacon, every contractor had to pay high salaries — even for the simplest jobs. So contractors, locked into paying high salaries, were not about to take a chance on beginners. They hired the most experienced union workers they could find. They used workers who would “normally never come near our neighborhood,” said aspiring construction worker John King. “I think it’s wrong that they do that. We want to provide. We’re not just derelicts and drug dealers and thugs.”
Because of the federal government’s regulation of wages, those who live in the community were essentially unemployable as entry level workers. Thus, they had no hand in working to rebuild their own community. It’s another example of how governmental controls can stymie the individual initiative and community pride that comes with a proper application of the principle of subsidiarity.