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October 05, 2013 4:56 PM Underwriting inequality: how taxpayer-funded government contracts create poverty-wage workers at the bottom — and executive excess at the top

By Kathleen Geier

Over at In These Times, Michelle Chen reports about an engine of economic inequality you may not have considered before: taxpayer-funded government contracts. She writes:

The progressive think tank Demos calculates in a new research report that private contractors have funneled up to $24 billion in federal funds into executive salaries. Yet, according to the analysis, the same system of contracted firms—from defense manufacturers to concession stands at national tourist sites—also employs hundreds of thousands of poverty-wage workers at the bottom.

There’s been talk about capping CEO pay, and earlier this year President Obama announced he supported limiting the CEO pay of defense contractors to $400,000. So far, such efforts have gotten nowhere. But reining in executive excess is important, in part because it complements ongoing campaigns to raise the pay of low-wage federal contract workers.

President Obama doesn’t even need Congress to do something about unequal pay in federal contracts. Activists are calling on him to sign executive orders that would both put a cap on executive pay for contracted firms, and create a living wage for low-wage contact employees.

They advocate other reforms to the federal contracting system as well:

DEMOS and other reform advocates recommend that contracting in general should be minimized “when work can be done more efficiently and effectively by government employees than private companies.” In addition, the group calls on the White House to enact reforms to avoid “contracts with companies that regularly violate wage and hour laws, workplace health and safety regulations, or other employment protections.”

Given the Republican-controlled Congress, President Obama has little power to proactively enact a legislative agenda. And with each passing month, he drifts closer to lame duck status. Actions to increase the wages of low-paid federal employees, or cap the executive pay of excessively compensated ones, would likely be widely popular. And as Chen argues, “taxpayer-funded federal contracts should reflect the values of a democratic social contract.” I hope the President acts soon. But given the administration’s reluctance to act on behalf of labor in previous disputes, I’m not holding my breath.

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee

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