Last month, The White House and the Department of Labor announced a new federal contracting rule that would help tackle income inequality by raising the minimum wage for contract employees. According to the Center for American Progress, 80 percent of the 5.4 million people working for federal service contractors in 2008 were earning less than a living wage for their city or region.
Raising the wage of federal employees and contract workers is a great step towards setting a wage floor for the entire nation. Governments are the largest employer in America, so when the feds pay their workers better, other sectors have to do the same in order to compete.
But there is much more that can be done to achieve a living wage, particularly at the local level.
According to the US Census Bureau, there are 19,492 municipal governments, 3,033 county governments, and 14,561 school districts in the United States. Each one of them provides services to their constituents through the labor of millions of workers. The public agencies that employ these workers represent an enormous amount of purchasing power. Cities, counties and school district can follow the lead of President Obama and reform their procurement processes in order to raise wages for their workers.
Employees in positions that are traditionally public service jobs are particularly vulnerable to wage reductions when their positions are outsourced. For example, in New Jersey, K-12 school food service workers had their wages cut an average of $4 to 6 per hour—and many of their health insurance benefits wiped out—when their jobs were outsourced to companies like Aramark, Sodexo and Compass. At the time of the study, food service companies had among the highest levels of employees and their children enrolled in the New Jersey FamilyCare program, driving up poverty and likely costing taxpayers far more than any savings realized through privatization.
Similarly, Denver’s Regional Transportation District (RTD) outsources 47% of its fixed-route bus service to Veolia and First Transit. The general manager of the RTD admits that the cost savings from the outsourced service are largely due to cuts in employee compensation. The starting pay for bus drivers employed by RTD is $15.49 per hour, compared to $12.25 for drivers with private contractors.
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And In December 2009, Milwaukee County outsourced nearly 90 janitors responsible for cleaning public buildings. Working for the county, these employees earned between $13.95 and $15.75 per hour plus benefits. When the service was outsourced, the contractor paid $8.00 per hour with no benefits. With families to support, many of the workers—who had more than 10 years of experience with Milwaukee County—couldn’t afford to take the degraded jobs.
Cities can enact legislation that requires contractors to pay their employees a living wage and provide reasonable benefits. Many cities have already passed “living wage ordinances” and more should follow their lead. And while these laws are a good first step, it should also be noted that the mandated wage levels too often fall short of what would truly be a family-sustaining wage.
Some public agencies are beginning to set new standards. For example, this month the Los Angeles Unified School District raised the minimum wage to $15 per hour for its service workers who keep the schools clean, safe and operating. Service Employees International Union Local 99 advocated for the new contract—which received unanimous support from the school board and was strongly supported by the district’s Superintendent. The contract is an example of how management, public service employees and elected leaders can come together to find a solution that pays a living wage and benefits everyone.
Raising the wage floor for everyone who works for the federal, state, or local government—or for an employer that benefits from government contracts—would increase the minimum wage for the majority of American workers. Other employers would also have to raise wages to compete for talent in the labor market.
In an era of rising income and wealth inequality, these are concrete steps our elected leaders can take to make communities more equitable and our families more financially secure.