Our Government Should Stop Subsidizing Inequality

Americans are coming to face the hard reality that they live in a new Gilded Age, with inequality at levels not seen since before the Great Depression. Even worse: Uncle Sam is subsidizing this lopsided economy.

The federal government is, indirectly, the largest low-wage employer in the country. While it has relatively few of the working poor on its payroll, the government hires thousands of private contractors that pay poverty wages to their workers, and hundreds of thousands of dollars to their executives.

A coalition of progressive groups are urging the Obama administration to issue an executive order requiring contractors to pay their workers a living wage — defined as the minimum required to meet one’s basic needs.

According to a new study by the think tank Demos, this could be achieved without increasing taxes by flattening the wage structure of federal contractors. As the report’s authors, Robert Hiltonsmith and Amy Traub explain:

The federal government spends an estimated $23.9 billion a year paying private contractors for the compensation of top executives. If taxpayer-funded payouts for these executives were capped at $230,700 — the salary of the US vice president — the pay of hundreds of thousands of low-wage federal contract workers could be raised by as much as $6.69 per hour or $13,902 per year for a full-time worker, without costing taxpayers an additional dime.