Statement About Stabilization of Wages and Prices in the Construction Industry

I HAVE today signed an Executive order establishing a cooperative mechanism for the stabilization of wages and prices in the construction industry.

The operation and success of the order will rest largely on the determined effort, the practical wisdom, and the mutual understanding of labor and management in an industry whose future is now being undermined by its own excesses.

Wage increases negotiated last year in the construction industry were more than twice those of factory wage increases in the same period. These increases, along with other distortions in the economy of the industry, were reflected in the rising costs of construction, including the costs of home building to hard-pressed families and the costs of defense and other Government construction projects to the hard-pressed taxpayer. But at the same time that wages and prices in the construction industry were soaring, unemployment in the industry rose to a level which is nearly double the national average.

The leaders of the construction industry-from both labor and management--are aware that unless this trend is countered disaster lies ahead. There is a limit to what those who pay for construction can afford. Continued excesses can lead only to less building, to continued unemployment, and to further distortions in the practices of the industry and in the economy of the Nation.

I am confident, however, that if sensible restraint is practiced the construction industry can look forward to a bright and prosperous future. Accordingly, the Federal Government has taken the initiative in what is essentially a corrective enterprise. Contractors and labor leaders have indicated their willingness to cooperate with the Government in fair measures to achieve greater wage and price stability.

I am therefore today reinstating the Davis-Bacon Act, which I suspended on February 23, 1971, and I am substituting a system of constraints to which I expect all parties will subscribe.

The Executive order delegates to the Secretary of Labor the responsibility to appoint a tripartite industry committee of 12 members, which--with the assistance of joint craft dispute boards established by contractor associations and international unions--will review all collective bargaining agreements negotiated in the construction industry after the date of this order.

The boards and the committee will determine whether future negotiated wage agreements fall within certain criteria established in the Executive order. Agreements that violate the criteria shall be disregarded in making wage determinations under the Davis-Bacon Act for Federal and federally assisted construction. In addition, all Federal departments and agencies shall review their construction plans in this light.

The Executive order also establishes a committee on construction to develop criteria for determining the acceptable level for prices in construction contracts as well as the acceptable level for compensations, including bonuses and stock options that are not subject to the terms of a collective bargaining agreement. The members of this committee shall be appointed by the Secretary of Housing and Urban Development.

The causes of the inflationary wage and price pattern in the construction industry are extremely complex. They are related in part to the highly fragmented way in which the industry and its bargaining processes are organized. A full solution to this problem will come only through patient, persistent efforts to change these fundamental conditions. Meanwhile, however, the action I have taken today will provide a framework within which management, labor, and Government can work together in limiting the dangerous consequences of continued wage and price inflation in the construction industry. All Americans have a stake in its success.