The Obama administration is currently studying a policy change that would alter the way in which the government awards federal contracts. If the proposal — known as the High Road Contracting Policy — were implemented, companies that pay their workers living wages and provide better benefits would gain a leg up, and more companies with labor and environmental regulation violations will be disqualified.
The idea is to encourage companies with better labor practices to compete for contracts, instead of the government endorsing a race to the bottom in terms of pay and benefits. This is actually a problem right now, as 20 percent of federally contracted workers earn poverty-level wages with no benefits. But the Big Business community is up in arms at the idea, with the Chamber of Commerce calling it an attempt at “rigging the government procurement process,” and a revival of “Clinton blacklist regulations.”
And the conservative media also can’t stand the thought of workers earning fair pay and having health insurance and pensions, as they have been slamming the policy for the last few days. CNBC’s Dennis Kneale said that it amounted to the government “looking for ways to spend more money.” The Weekly Standard’s Matt Continetti said “it’s a dangerous policy” that “shows Obama’s weakness.” CNBC’s Simon Hobbs even added that “this is just not the way to run an economy. If anything, wages at the moment should be falling.” Watch a compilation:
Not surprisingly, CNBC and its ilk are willing to go to bat for bankers receiving huge bonuses and tax evaders, but not for working Americans trying to earn a living wage. But there’s simply no reason for the government to award contracts to companies that pay their workers below poverty-level wages or that are found to have violated labor and environmental standards, which happens all too frequently.
Plus, as CAP’s David Madland pointed out, these standards can won’t necessarily raise costs for the government, as they will likely reduce payments on Medicaid, Food Stamps, and other programs used by workers receiving less than a living wage. And not having standards for contracts actually leads to companies with shoddier employee treatment receiving a competitive advantage:
When workers are poorly compensated on the front end, taxpayers often bear additional costs on the back end, such as for Medicaid, Earned Income Tax Credit and food stamps. In practice, this amounts to something like a government subsidy for low-road companies, while high-road companies are placed at a competitive disadvantage.
This makes sense, as it’s certainly easy for an employer paying below minimum wage and foregoing benefits to bid low on a contract. And research has shown that, if higher standards are taken into account, more companies that treat their employees well will try to win contracts. For instance, one contractor in Maryland — which implemented a living wage standard for contracts — said that without strong labor standards, “the bids are a race to the bottom…[The living wage] puts all bidders on the same footing.”