President Obama will announce tonight that he is delivering a big raise to more than a million low-wage employees of federal contractors. He is issuing an executive order that will require workers under new contracts to be paid a minimum of $10.10 an hour (or higher if local minimums are).
This executive order does not apply to current contracts, but will apply on a rolling basis as contracts get renewed or new contracts get made, giving the companies the opportunity to adjust their bids.
This will provide a boost to between 1 and 2 million workers, but also a boost to their local economies. It will also pressure Republicans in Congress to stop obstructing action to raise the national minimum wage to $10.10 and index it to the cost of living.
The Problem: Government Outsourcing
After years of outsourcing and privatization, the U.S. government is now one of the largest employers of low-wage employees. The game has been to take something that the government does well and “contract out” that function to a private company. The well-paid government employees all lose their jobs. The company that gets the contract hires them back or hires new people at very, very low wages and no benefits, and the people at the top of the company pocket the difference.
Local economies take a hit as people have little to spend, as well as the tax base as these people are pushed into poverty. Because of the low wages, the government does not save money because people qualify for food stamps and other assistance. The service once performed by the government also degrades as companies engage in cost-cutting. The only beneficiaries are the people at the top of these companies, who
bribe give campaign dollars to the Republicans who push these policies.
Two great studies looked at the problem, a National Employment Law Project (NELP) report, “Taking the Low Road: How the Federal Government Promotes Poverty-Wage Jobs Through its Contracting Practices, A Survey of Workers and Their Stories” and a Demos study, “Underwriting Bad Jobs: How Our Tax Dollars Are Funding Low-Wage Work and Fueling Inequality.”
Now Demos president Heather McGhee is praising the president for his action:
“We commend President Obama for using his executive authority to give a boost to hundreds of thousands of hard-working Americans trying to reach the middle class. The nation as a whole benefits from an economy where all workers earn a decent living.”
NELP is also praising the president:
“The President clearly shares the frustration of working families waiting for Congress to pass an urgently needed and overdue increase in the federal minimum wage, and thankfully he is moving ahead with this important step to boost pay for workers struggling to afford the basics,” said Christine Owens, executive director of the National Employment Law Project (NELP). “I’m hopeful the President’s leadership will inspire Congressional leaders to follow suit by taking action to raise wages for millions of Americans relying on low-wage jobs to make ends meet.”
First, hundreds of thousands signed petitions asking President Obama to issue this executive order, getting around Republican obstruction and sabotage.
In addition a Huffington Post report on the president’s action names some members of Congress who stand out for their work on this:
The move marks a significant victory for labor unions and a handful of progressive Democrats who pressed the president to issue the order, including Reps. Keith Ellison (D-Minn.) and Raul Grijalva (D-Ariz.), co-chairs of the Congressional Progressive Caucus, and Sen. Bernie Sanders (I-Vt.).
Ellison personally handed the president a letter on the matter last month. Just last week, at an event hosted by the left-leaning Economic Policy Institute, he publicly questioned Jason Furman, the chairman of Obama’s Council of Economic Advisers, on whether Obama planned to issue the order. Ellison later criticized Furman for what he felt was an evasive answer.
Next up are the several thousand federal workers who do not make as much as $10.10 an hour. If the president cannot raise their wages by executive order, as he did for employees of contractors, he should demand that Congress act immediately to raise the minimum to $10.10 for all workers, and index it to rise with the cost of living.