NCPA - National Center for Policy Analysis


March 9, 2010

In a novel variation on pay to play, the Obama Administration is planning to force companies to raise pay and benefits for workers if they want continued access to federal contracts.  Waiting to cash in on the impending Executive Order are unions that would end up with a piece of the government's $500 billion in annual contracts, says the Wall Street Journal. 

The government can't steer contracts directly to the unions, but it can use its authority over how taxpayer money is spent to favor unions and their agenda.  This is good news for Andy Stern and his Service Employees International Union, but not so good for job creation, says the Journal. 

The proposed Executive Order is being drawn up by Joe Biden's Middle Class Task Force: 

  • It would oblige government procurement agencies to give contracts to "responsible contractors" who pay workers well and offer higher health, pension, sick leave and other benefits.
  • At each federal agency, a new labor commissar tasked with making these judgments will also have discretion to award an advantage to companies which, by some calculation, treat employees better; under Democrats, this would tilt toward unionized companies.
  • And these labor standards would have to be enforced across a company, not just at the unit bidding for a contract.
  • This is opening the back door to government-mandated labor standards, another union dream. 

Because the rule could force up salaries and expand benefits for existing workers, it creates an incentive to cut employment rolls, says the Journal.  Unions usually worry less about European-style chronic unemployment than merely protecting whoever has union jobs now.  Barely 7 percent, and falling fast, of the private-sector work force today belongs to a union. 

Smaller businesses will find it harder to win government work.  Even if they put in better bids, many can't match the benefits offered by big companies, or always meet the government's plans to impose a new "livable wage" standard for employees of its contract firms.  This is like putting the Davis-Bacon Act on steroids.  That's the 1931 legislation that continues to distort federal spending by establishing "a prevailing wage" standard for public works projects, which in practice means the top local union wage, says the Journal. 

Source: Editorial, "Procuring the Union Agenda; A White House plan would be the Davis-Bacon Act on steroids," Wall Street Journal, March 10, 2010. 

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