How Our Tax Dollars Are Fueling Inequality

My name is Roxanne Mimms and I work for a food service contractor at the National Zoo.  I work full time but make barely minimum wage. I’m here because workers can’t live off what contractors pay us.  I’m here because I don’t want my two children to grow up on public assistance.  I’m here because I have dreams – My American Dream is a good job with fair wages to provide for my children, being able to pay my bills on time and save for the future.  I’m here because I want to help all the workers at the National Zoo whose dreams are on hold.”

I was proud to stand with Ms. Mimms—and see her beautiful little ones—at the launch of Good Jobs Nation Wednesday morning in Washington, D.C. Ms. Mimms and other employees working for federal contractors and other private businesses serving the American public joined together to speak out about their wages and working conditions. Faith leaders, community groups, and members of Congress—including Representatives Keith Ellison and Eleanor Holmes Norton—stood with them. The campaign seeks a living wage and a voice on the job for low-wage private sector employees working on behalf of America, many of whom could see their work standards lifted if President Obama chose to sign an executive order.

I had the opportunity to present the results of a new Demos study at the event. In “Underwriting Bad Jobs: How Our Tax Dollars Are Funding Low-Wage Work and Fueling Inequality,” my colleague Robert Hiltonsmith and I found that nearly two million private sector workers employed by government contractors, paid by federal health care spending, supported by Small Business Administration loans, working on federal construction grants, and maintaining buildings leased by the federal government earn $12 an hour or less (in some cases, much less). We the taxpayers are fueling a vast low-wage economy along the same lines as notorious low-road employers like Wal-Mart and McDonalds, whose workers are also standing up for better treatment.

Historically, America has tried to do better than this. We have a long record of extending workplace protections to the people working on behalf of our country. Yet in the course of our research we discovered that prevailing wage laws including the Davis-Bacon Act, Walsh-Healey Act, and Service Contract Act are not enough to ensure decent standards for all private sector workers supported by our public dollars. When it comes to protecting workers, America is falling short of its vision.

At the same time, not everyone working on behalf of America earns low wages. Many senior executives at companies with federal contracts are doing very well for themselves. And we as taxpayers provide generous reimbursements to them. Today, federal contractors can be reimbursed for as much as $763,029 in compensation for any given employee. Barack Obama earns about half that much.

And so we are not just fueling low-wage work but we’re fueling the same trend toward inequality that we see having such a corrosive effect in our economy as a whole. In this case, that destructive inequality is maintained and exacerbated on the taxpayer’s dime.

Our study focused primarily on illuminating the problem, but we also looked at how it might be addressed.

Cities and states across the country have successfully used a range of different types of living-wage laws and economic development agreements to raise job standards. They’ve found that the cost to taxpayers does not rise substantially when workers are paid decent wages. There are a number of reasons for this: companies that raise wages benefit from productivity gains and reduced employee turnover. By raising wages for these workers, there are also public savings due to the reduction in demand for public benefits. If people are paid enough to feed their families, they don’t need food stamps. As an earlier report from the National Employment Law Project has detailed, local living-wage agreements could be a model for the federal government. For employees of federal contractors in particular, an executive order from the President could raise standards.

This affects all of us. When our tax dollars underwrite bad jobs, the economy as a whole is weakened and all of us are negatively affected. There is a ripple effect as low-paid workers and their families have little money to spend, hindering economic growth that could be creating more jobs. Poorly-paid workers also contribute less in taxes and are more likely to rely on public benefits to care for their families. In contrast, we would all benefit from a different type of economy: an economy where working people can earn good wages and support their families.

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