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Why Obama Must Announce a Good Jobs Executive Order in the State of the Union

Amy Traub

I fear that John Boehner is not going to raise the minimum wage. 

It doesn’t matter that 76 percent of Americans support a wage hike, or that studies indicate that the minimum wage reduces poverty and that raising it would boost our economy and create jobs. And I’m worried that if, in his State of the Union Address next week, President Obama again calls on Congress to raise the minimum wage, even in the most powerful and evocative terms, that won’t move Boehner to act either. 

But there is a glimmer of hope: when it comes to at least one group of low-paid workers—the more than 500,000 low-wage employees of federal contractors—President Obama doesn’t have to wait for Congress in order to take action and improve jobs. 

The President can act himself, through an executive order similar to the one President Johnson signed in 1965 to ban employment discrimination by contractors. According to the Washington Post, the President is considering announcing a “Good Jobs” executive order in his State of the Union Address next week. He should do it. In signing such an order, President Obama would not only improve conditions for low-paid contract workers, but would also give greater momentum to the fight for a federal minimum wage increase that would benefit everyone. 

In research my Demos colleague Robert Hiltonsmith and I completed in May, we found that the federal government is the nation’s leading low-wage employer, with nearly two million private sector employees paid through federal contracts, grants, loans, concession agreements and property leases were paid $12 or less per hour. Despite a proud history of efforts to ensure that employees working on behalf of America are treated fairly on the job, and that companies that have the privilege of doing business with the United States are upholding high standards of employment practices, many federally funded jobs today have been subject to the same race to the bottom that has lowered standards for other work.  

Paying wages close to the inadequate federal minimum wage is a disgrace in its own right, but a study by the Senate Health, Education, Labor, and Pensions Committee revealed that federal contractors are also flagrant repeat violators of our labor laws, often paying less than the minimum wage and denying workers overtime pay. According to committee chairman Senator Tom Harkin, nearly 30 percent of companies receiving the highest penalties for violations of federal labor law are also federal contractors. In fact, the 49 federal contractors liable for major violations of labor law were responsible for close to 1,800 distinct enforcement actions by the Department of Labor over six years and were obligated to pay $196 million in penalties and back wages. 

While the nation has traditionally held companies performing work on behalf of the American people to a higher standard, the Senate report shows they now cluster near the bottom of the barrel. 

The low pay and labor law violations harm all of us. When our tax dollars underwrite bad jobs, economic recovery is stalled. There is a ripple effect as low-paid workers and their families have little to spend at businesses in their communities, hampering economic growth that could be creating more jobs. Poorly-paid workers also contribute less in taxes and are more likely to rely on public benefits to care for their families. This is one reason why raising wages for low-paid contract workers would not end up adding significantly to public costs: federal taxpayers are already paying for these workers twice, through both the contracts themselves and the workforce subsidies in the form of Medicaid, food stamps, home heating assistance and other benefits that low-paid employees of federal contractors must rely on to make ends meet. 

In fact, if we are interested in reducing public costs for contracts, the best place to look is at the lavish pay packages of contracting executives. Extrapolating from a study by the Government Accountability Office, my colleague Robert Hiltonsmith and I found that taxpayers spend an estimated $20.8 to $23.9 billion a year to compensate top executives of federal contractors. While Congress acted in December to reduce the amount the public agrees pay for the compensation of contracting executives, we still offer them more than twice what we pay the Vice President of the United States for his service to the country. In many cases, performing work in-house by federal employees, who also tend to earn more livable wages at the low end, would be more cost-effective than contracting out to firms with highly-compensated executives. 

President Obama has recognized that making the economy function for working people is “the defining challenge of our time” and vowed that, in the face of partisan obstruction, “whatever executive authority I have to help the middle class, I’ll use it.” An executive order improving the wages of low-paid contract workers would be a decisive way to do so. The nation as a whole would benefit from an economy where all workers earn good wages—but as long as Congress blocks more comprehensive action, the President himself must act to see that the people working on behalf of our nation are paid and treated fairly, establishing a powerful example for all other employers to follow.