The federal prevailing wage law is the Davis-Bacon Act of 1931, which applies to government construction projects involving more than $2,000 of federal funds. The act, which has served as a model for many subsequent state prevailing wage laws, requires that construction workers receive "wages that will be determined by the U.S. secretary of labor to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the city, town, village, or other civil subdivision of the state in which the work is to be performed. ..." The Davis-Bacon Act does not call for the exclusive use of union wages, nor does it provide guidance as to how a prevailing wage is to be determined out of the many rates that might be found, although the Department of Labor’s practices often result in union wages being applied.
Federal prevailing wages are based on a U.S. Department of Labor survey of employers and unions in a locality. Prior to 1985, if a majority of workers in the area received the same pay rate, that rate was deemed to be the prevailing wage. If there was no majority wage, the wage paid to at least 30 percent of workers would be considered to prevail. If a prevailing wage could not be found under the first two criteria, the Department of Labor took the weighted average of all the rates that had been submitted, accounting for number of workers covered and hours worked.
This rule meant that union scale applied quite frequently, especially in areas with a union presence strong enough to trigger the 30 percent rule. The Reagan administration changed the rules considerably in 1985, in particular dropping the 30 percent rule, so that unless a union provided a majority of the workers in a particular craft, it was not guaranteed to set the prevailing wage, and an average wage would be calculated instead. Professor Armand Thieblot, formerly of George Washington University, has presented evidence that the Department of Labor has been prone to manipulate survey results to create the appearance of a union majority wage where none actually exists. Nonetheless, the federal law does not mandate the use of union wage rates, and in those counties where union membership is low, the rate set by the federal government will be closer to the market average.