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Stimulate This, Professor Tells Obama

There’s a former White House policy adviser in the Carter and Clinton administrations who says President Obama can bypass Congress on additional stimulus efforts by the stroke of his pen.

If I understand this law professor at the University of California, Berkeley, an executive order to compliant federal contractors would improve wages and job standards that would set an example to the rest of the nation’s businesses and decrease the shackles of national unemployment.

No legislation required. And, Congress can bicker over the partisanship of the stimulus question until they are blue in the face, according to law professor Christopher Edley Jr.

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.

Edley argues higher wages reduces employee turnover and increases productivity. Some macro examples he cites:

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.

Furthermore, the lowest paying jobs will be more attractive to the unemployed seeking a steady paycheck and reduce the “millions of workers (who) are exploited by companies that cheat on paying the minimum wage and other basic protections.”

Specific micro examples:

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.

Federal purchases, he said, amount to a half-trillion dollars annually but 1 in 5 federally contracted workers earn less than the poverty level for a family of four.

Edley maintains it is a simple process for the federal purchasing contracts to be reformed so they encourage higher wages and reduce fraud in other areas such as double billing.

(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.

His solution: Don’t award contracts to proven scofflaw companies.

He did not address no-bid contracts which have come under fire during the Bush administration and continued under Obama. Two classic cases involve Halliburton and Xe, formerly Blackwater USA, the two major service providers in the Iraq and Afghan wars.

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EPILOGUE

The way I see it, the good professor has rendered a policy proposal from his chair in the academic hall of ivy. Inherent in his executive order plan is to raise the bar for the lowest bidder on the taxpayers’ dime, and leading by example, others will follow. I am in total agreement that higher wages in a competitive labor market reduces employee turnover. I am highly suspect that what is gained in labor continuity and increased efficiency translate into profits which keeps the employer in business. Certainly not when the other 78% of the work force not under federal contracts play under a different standard of rules. Professor Edley’s proposal is worth a try but I doubt it would account for much more than one blip on the national unemployment radar screen.

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