The report from a public policy organization Demos, set to be released Wednesday, estimates that taxpayer dollars fund nearly 2 million private-sector jobs that pay $24,000 a year — about $12 an hour — or less. Those workers owe their incomes to government contracts, Medicare and Medicaid spending, and federal infrastructure funds, among other public sources. In contrast, Demos estimates that about 1.4 million workers earn that amount or less at Wal-Mart and McDonald’s, which are two of the largest employers of low-wage workers.
The findings highlight inequality within the government contracting industry; as chief executives of major contractors rake in millions, many contract employees are struggling to get by, according to the report from Demos, which advocates for worker-friendly policies. It is a situation that could be worsened by the budget pressures of sequestration, which is pushing the federal government to spend fewer dollars and pursue lower-priced contracts.
The broader economy is mired in a similar trend; job creation in the recovery from the Great Recession has been bottom-heavy. Most of the 165,000 net new jobs that the Labor Department reports were added in April came in low-wage sectors, such as retail, food service and temp work. A study last year by the National Employment Law Project found that low-wage occupations accounted for one in five jobs lost during the recession — but they accounted for three out of five jobs added in the recovery.
The Demos findings will be announced at an event launching Good Jobs Nation, a group of low-wage workers who are banding together to pressure the Obama administration to take steps to guarantee higher pay for federal contracting workers, possibly via executive order.
“We know that growing inequality and these larger, dead-end jobs are a national problem,” said Amy Traub, a senior policy analyst at Demos who authored the report. “This is just a piece of that. But the key is, this is a piece that we’re responsible for and really that we can do something about” as taxpayers.
The flip side to that argument is obvious: Forcing contractors to raise wages could drive up costs for taxpayers in a time of budget distress. Researchers at Suffolk University calculated in 2008 that laws mandating the government pay competitive wages on construction projects raised the cost of those projects by about 10 percent.
“The federal government should be responsible stewards of tax dollars, paying contractors only what is necessary to ensure quality work,” said Michael R. Strain, a labor economist at the conservative American Enterprise Institute. “Of course, this means paying fair wages to contractor workers — but the market should determine what is a fair wage.”
Advocates counter that paying higher wages will boost spending by those workers, spurring economic activity. “In order to get our economy moving again, low-wage workers need to do better,” said Travis Dupree, an organizer with OurDC, one of the groups behind the worker mobilization effort.