The economic power of Obama’s pen


With the stroke of a pen, President Obama could do more for the economy than the second stimulus measure that’s going nowhere fast. He can create the good jobs our economy needs by using the power of federal contracting to reward employers that improve job standards. An executive order to encourage federal contractors to provide their workers with, among other things, a living wage, would require no legislation, no battle in Congress.

Unemployment is stuck near the double-digit mark, but that average blurs the patchwork crisis facing workers. Washington plays the partisan fiddle, as the nation urgently needs to create more good jobs. It is likely that a large part of the private-sector job growth in this limping recovery will be in industries that pay low wages. But wages at the bottom are stagnant, and millions of workers are exploited by companies that cheat on paying the minimum wage and other basic protections.

From Lyndon Johnson’s executive order banning racial and gender discrimination, to Richard Nixon’s affirmative action goals and timetables, to Jimmy Carter’s anti-inflation controls, presidents have long asked federal contractors to lead the nation by example with model business practices. These executive orders have led to positive results for the taxpayers and the nation as a whole.

Federal purchases, such as military uniforms and janitorial services, total a staggering half a trillion dollars a year. But of the resulting millions of jobs, too many pay poverty wages. An estimated 1 in 5 federally contracted workers earns less than the poverty level for a family of four, according to a 2009 analysis from the Economic Policy Institute.

There’s more. Why, despite years of scandals about contractor fraud and misconduct, do we continue awarding lucrative, taxpayer-funded contracts to scofflaw companies that violate core labor protections? BP is a case in point. BP received the largest penalty in OSHA history for failing to remedy safety violations that led to a fire and explosion, killing 15 workers at a Texas refinery in 2005. Yet it continues to receive lucrative federal military contracts (totaling $838 million just this year). In another example, a 2004 Labor Department study found 20,347 cases of employers with federal contracts failing to pay their workers even the minimum wages and benefits required under their contracts.

The president can stop federal agencies from awarding contracts to repeat lawbreakers and to companies that create poverty-wage jobs. Simple reforms to the contracting process can turn federal purchasing again into an engine for promoting model employment practices — and in the process improve results for the taxpayers.

First, stop rewarding repeat law-breakers. Doing business with government is a privilege. Cheaters should be rooted out through more rigorous review and screening, and then cut off.

Second, the president should encourage federal agencies to do business with companies that pay their workers living wages and benefits. Many cities and states have found that contracted work that pays decently not only produces better jobs for local communities but also delivers better quality and more reliable services for government.

Maryland, for example, found that encouraging living wages boosted competition for state contracts by expanding the pool of “good” firms that could compete on a level playing field. In Los Angeles, a study of the city’s living wage law found that staff turnover rates at firms covered by the law averaged 17% lower than at firms that weren’t. And a leading study of the San Francisco airport by researchers at the University of California found that after the airport boosted wages, turnover among contracted security screeners plummeted from 95% to 19%, service quality improved dramatically, and the airport saved thousands of dollars per worker in new employee recruitment and training costs.

A modest proposal? Well, 22% of workers in the United States are employed by a company that does business with the federal government, according to the Labor Department. A small nudge from the federal government thus has the potential to promote broader adherence to model employment practices across our economy.

President Johnson’s historic Executive Order 11246, requiring federal contractors to provide equal employment opportunity regardless of race, religion, gender or national origin, played a vital role in dismantling the stubborn obstacle to economic growth and prosperity posed by segregation and discrimination. Today, poverty wages and pervasive violations of workers’ basic legal protections present a grave drag on economic recovery and prosperity. The president has the power to press more employers to do well for the taxpayers by doing right by their workers.

Christopher Edley Jr. is professor of law and dean of the UC Berkeley School of Law. He held White House policy positions in the Carter and Clinton administrations.