How Private Contracting by Government Fans Inequality

NSA leaker Edward Snowden may have earned $200,000 a year working for Booz Allen, as he claimed. Or maybe he earned $122,000 a year, as the consulting company claims. Either way, we’re talking about a lot of money for a 29-year old systems administrator with a community college degree living in Hawaii.

And herein lies an important dimension of this story: Some private contractors are routinely paying hefty salaries to employees doing government work that can and should be done more cheaply – even as many of other federal contractors barely pay a living wage. These inequities matter given that Washington spends over a half trillion dollars a year on contractors.

Let’s take up the second half of the story first. As Demos reported in our recent report, "Underwriting Bad Jobs":

Hundreds of billions of dollars in federal contracts, grants, loans, concession agreements and property leases go to private companies that pay low wages, provide few benefits, and offer employees little opportunity to work their way into the middle class. . . . We find that nearly two million private sector employees working on behalf of America earn wages too low to support a family, making $12 or less per hour.

That’s appalling. But the other half of the story is pretty disturbing, too: the high compensation that also is very common in the contracting system. Employees of these contractors – again, funded by tax dollars – can be paid up to $763,029 a year. That’s nearly twice as much as the highest paid employee in the federal government, the president, and about ten times the salary of an average federal employee.

Granted, the high pay of private consultants is a tricky issue. Thanks to decades of anti-government fervor, the feds simply can’t pay competitive salaries for certain kinds of highly skilled professionals and contracting is one way around this problem. If consulting companies couldn’t pay high salaries, the government would have a hard time getting certain things done.

But high six figures?

The current system is problematic and inequitable. Even as the federal workforce has shrunk in real terms in recent decades and even as contractors are nickel and diming low-wage workers, we’ve seen the rise of a wealthy consulting class – with middlemen like Booz Allen raking in huge profits, often facilitated by their inside connections. If Snowden was making $122,000, you can bet that Booz Allen was billing a lot more than that. 

Reforms are overdue. Simply put, we need to rein in pay at the top of this system and be more generous to those at the bottom.