Report | Budget, Taxes, and Public Investment

Principles for Gulf Coast Reconstruction

Principles for Gulf Coast Reconstruction

Prepared by the Working Group for a Fair Response

Jared Bernstein, Economic Policy Institute
Ross Eisenbrey, Economic Policy Institute
Steve Savner, Center for Community Change
Mark Greenberg, Center for Law and Social Policy

The destruction to life and property caused by Hurricane Katrina surely renders this the most severe natural disaster in our history.   Though the extent of damage and death is still being assessed, the storm covered 90,000 square miles.   The city of New Orleans was devastated—80% of the city was underwater until a few days ago—but other areas, such as the Gulfport-Biloxi area, were also hit hard.   More than one million persons fled their homes in the wake of the storm and its aftermath.

The federal government has already allocated $62 billion to address the needs of the hundreds of thousands of evacuees who have fled from uninhabitable areas, as well as to begin the massive rebuilding effort.   Much more federal funding is expected to follow.

This policy memo is focused on the rebuilding effort.   The crisis of Katrina presents our government with a unique opportunity to simultaneously address the destruction done by the storm and the needs of the citizens of the affected areas, many of whom are dispersed throughout the region and even the country.   In the coming months and years, substantial federal resources will be committed to cleaning up and rebuilding Gulf Coast infrastructure and communities.   While federal resources are essential to this process, community engagement in planning for and doing the actual work is also essential.   Specifically this means that:

1. People who lost everything in the storm need to play a central role in rebuilding their communities.  

Federal policy should require that residents of the affected communities, including displaced residents, have a preference for all jobs that are created in the reconstruction process, to the maximum extent practicable.   Contractors in the rebuilding process should be required to do outreach, assisted by government at all levels, to identify and hire residents to fill these jobs.   The rules regarding hiring, training, etc., should be made explicitly part of every clean-up or rebuilding grant or contract.  

2. Now, more than ever, residents and others who rebuild need fair and decent wages for the work they do. Their wages and income are as much a part of rebuilding their communities as the contracts on which they work.

Requirements of the Davis-Bacon Act and the Service Contract Act should apply to all reconstruction projects funded in whole or in part with federal funds.   Unfortunately, on September 8, the president suspended the Davis-Bacon Act in areas affected by the flood, even as the federal government was in the midst of letting contracts related to the disaster.   The stated rationale for the suspension was to save the taxpayers money.   However, there are many reasons why the suspension is especially misguided.

First, a foremost goal of the reconstruction should be to provide decent jobs and incomes to the residents of affected areas.   While there is an obvious need to move quickly and efficiently, it is equally important to avoid exacerbating the racial and income inequities that pervade the affected areas.   New Orleans, for example, has a poverty rate of 23%, close to twice that of the nation (about 13%).  

Second, the devastation of the storm means that in some of these areas, such as New Orleans, there is little in the way of a recognizable market economy.   That means there is no market wage to speak of, no competitive forces at work that we could count on to set a fair wage.   In the face of such a market failure, government contractors will, in effect, set the market wage, and the fairest way to do this is to use prevailing wage guidelines.

Third, our goal is to return the Gulf Coast to normalcy.  By definition, the wages that prevailed before the hurricane should be reestablished in its wake.  An argument could even be made that wages should be higher in light of the new hazards of biological and toxic contamination that are present in some locales.  There is no justification for the federal government to drive wages lower than those that prevailed before the disaster.  A New York Times  editorial on the suspension raised this point: “Does Mr. Bush really believe it is the will of the American people to deny the prevailing wage to construction workers in New Orleans, Biloxi and other hard-hit areas?”

Davis-Bacon rules apply only to the construction sector, but there will be many employment opportunities in other sectors as well.   In services, wage standards are also necessary, and the prevailing wage rates under the Service Contract Act should apply.   According to recent SCA wage determination documents for the New Orleans area (which are posted on the Web at ) wages in occupations likely to be relevant in the reconstruction cover a wide range.   Food service wages range from $7-10/hour; transportation jobs pay from $8-15; licensed practical nurses are in the $14 range; registered nurses average around $30/hour.   Note that unlike Davis-Bacon, the SCA does not explicitly allow for suspension in times of emergencies.  

3. The plans to rebuild the city of New Orleans and other areas affected by Hurricane Katrina must include provisions to provide comprehensive healthcare to those workers.

Every victim of the hurricane should be covered by Medicaid for six months, unless private insurance can be obtained sooner. To ensure adequate health care for those rebuilding the city, all FEMA/disaster relief contractors should be required to spend at least the national average — 11 percent of their payroll — towards health care. If contractors do not offer 11 percent, they should be required to pay the difference between what they do offer and 11 percent into a fund, which will be dedicated to providing Medicaid coverage to uninsured and underinsured workers. Another reason for ensuring broad health-care coverage is that hospitals struggling to recover from the storm will likely be treating large numbers of patients without private coverage.

4. Building the skills of residents will help them participate in the rebuilding process and is an investment in the future for them and their communities.

Residents should have access to skill training they need to qualify for jobs that will become available, including access to apprenticeship and pre-apprenticeship programs, consistent with the need to get work done as soon as possible.

5. The distribution of rebuilding work should be fair, not just another avenue to reward political heavyweights and insiders.

The recent weakening of contracting requirements that ensure opportunities for minority and women-owned businesses should be reversed.  Similarly, the recent weakening of affirmative action employment requirements for federal contractors should be reversed.

6. The rebuilding process needs to be about rebuilding public confidence in government at all levels, and there needs to be transparency to help insure that the rules established for rebuilding are met.

All companies that participate in clean-up or reconstruction activities as direct government contractors or subcontractors shou
ld maintain and make available to the public information relating to their compliance, and efforts to comply with prescribed hiring and compensation requirements.

7. The voices of residents need to be heard throughout the rebuilding process.

Government officials need to confer with community representatives throughout the planning and rebuilding, including monitoring these standards for rebuilding, to help insure that stronger and healthier communities emerge for the future.

Relocation, Housing: Some of those who left the affected areas may not have the resources to return, and many will not have housing. The Housing Area Command, HAC, was created by FEMA to play the central role in providing emergency housing.  Along with FEMA, HAC includes private sector contractors and partners from the U.S. Department of Housing and Urban Development, the U.S. Army Corps of Engineers and the American Red Cross.  HAC is actively letting contracts with private firms—five are listed in this press release: Such efforts are likely to escalate quickly, meaning the HAC may be an important leverage point for accomplishing the goals of local   Thus, we suggest that Congress specify that Federal contracts let by HAC must include training, wage, and local hiring requirements.