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Yes, He Can: Momentum Grows for an Executive Order to Raise Wages of Low-Paid Contract Workers

Amy Traub

“Whatever executive authority I have to help the middle class, I’ll use it,” announced President Obama in last month’s landmark economic address in Galesburg Illinois. Now consensus seems to be building around one thing President Obama can indeed use his executive powers to do to boost hundreds of thousands of workers into the middle class: raise their wages.

The public has long supported raising the minimum wage for all working Americans and many economists agree that a broad minimum wage hike makes economic sense. But raising the federal minimum wage would require Congress to act. And as my colleague Joe Hines noted on PolicyShop this week, Congress is not exactly rushing to cater to the interests of the poor and low-wage workers.

So an executive action by President Obama is especially appealing. And while the President cannot unilaterally increase the minimum wage for everyone, he can change federal contracting procedures to favor contractors that pay their employees enough to live and raise a family on. This week, the New York Times published a powerful editorial calling on the President to do it. Drawing on a recent Demos study of low-wage contract employees and other federally-supported workers, as well as research from the National Employment Law Project, the Times made the case that:

Nearly 50 years after. . . President Johnson signed an executive order mandating nondiscrimination in employment by government contractors… [President Obama] could respond much as Mr. Johnson did — with an executive order aimed, this time, at raising the pay of millions of poorly paid employees of government contractors. . . challenging the notion that the best contractor is the one with the lowest labor costs.

Over at the Roosevelt Institute, Senior Fellow Richard Kirsch agrees,  pointing out that “In the 1930s, and again in the 1960s, the federal government helped raise wages for workers. Congress passed laws and presidents issued executive orders that required businesses with federal contracts to pay their workers their industry’s prevailing wage. That meant better pay.”

Jared Bernstein, former economic advisor to Vice President Joe Biden, says this is an “an executive order whose time has come.” And while Dr. Bernstein apologizes for bothering the President while he’s on vacation, the truth is that many of the federal contracting jobs in question don’t come with paid vacation days anymore than they pay a living wage.

The exact form an executive order should take is worth considering. Bernstein argues that:

procurement officers—the folks who decide which firms get the bid—should be able to factor job quality into their decision.  It’s that simple.  By law, they have to take the lowest bid, but that rule is of course conditional on the quality of the output, otherwise my kid could win the bid to build a bridge out of Legos. Well, there’s good evidence that the quality of the work is a function of the wage, working conditions, commitments to training, workforce tenure, and such characteristics that we see in high-road versus low-road employers. Simply allowing procurement officers to consider those characteristics when they’re deciding who gets the bid would improve the quality of work and the living standards of thousands of contracted workers.

As the Times points out (and we argued in our recent study) “Mr. Obama also could tell federal agencies to conduct reviews of contracts to see if the work should be done in-house.” What's more, an effort to raise wages for low-paid contract workers could be combined an order to stop contractors from discriminatory hiring based on sexual orientation or gender identity. If President Obama is serious about his willingness to use executive authority, he could accomplish a great deal. And if a growing chorus of policy experts and eminent newspapers can’t convince him to take action, workers themselves are likely to take to the streets again and demand a better deal.