Congress Must Address Outdated Wages for Federal Contract Service Workers
Across America, millions of workers have been able to secure better wages and benefits, thanks to labor shortages and high levels of consumer demand. Of course, rampant inflation has eaten into those salary gains, but overall, the position of the worker in the U.S. is very strong.
Of course, there are segments of our economy struggling to keep pace with higher wages. One example is workers employed by companies that have federal contracts to perform services for the government. These services include essential operations like housekeeping for federal buildings. The industry is struggling to keep up with current salary and benefits requirements, because the methods of determining the salaries and benefits for those employees were set in the agreements inked years ago – before the labor shortages, high inflation, and increased wages that we face today.
Therefore, it is time for lawmakers on Capitol Hill to consider common-sense legislation that will allow companies serving as federal service contractors the ability to pay their employees more – based on current circumstances that might not have been envisioned when contracts were originally signed. This does not concern federal contractors who sell parts for a fighter jet to the government. Rather, I am concerned about companies who are paid to service those airplanes and their employees who work as a “blended federal workforce” performing services on behalf of the federal government. Under existing rules, their current contracts do not always allow these employers to pay their service employees fair market wages.
At the heart of this issue is the McNamara-O’Hara Service Contract Act (SCA) of 1965. It is a federal statute that governs and regulates service contracts between the federal government and individuals and/or companies. The SCA both explicitly governs minimum wage and benefits requirements for these service workers and mandates exactly how much a contractor can profit from the project. In many ways, this framework works, serving a tool to ensure good government and to reduce waste, fraud, and abuse.
For any law to be most effective, it must be a living document with the ability to adapt. After all, there are not very many aspects of America today that are the same as they were back in 1965.
One factor making the SCA ripe for reform is the fact that President Joe Biden raised the federal minimum wage from $11.25 an hour to $15. To be clear, I strongly supported this move because there is nowhere in America today where a person can live and support a family on $11.25 an hour. I have no patience for anyone who thinks paying starvation wages to employees is morally defensible in a nation as wealthy as the U.S.
However, because of this federal minimum wage increase, many service companies that operate based on this outdated statute are struggling to pay their employees fair wages and benefits for two reasons.
First, you have an issue called “wage compression” where entry-level employees make so much that the employers cannot afford to pay more seasoned employees enough to make it worth them sticking around.
Second, those contracts set fixed amounts of profit that these companies can earn from performing essential government functions. Hence, a mandatory wage increase means that the company is forced to pay higher salaries and improved benefits by going into their own pockets. The result is the employer not earning the level of profit they were promised when they signed the agreement.
The result is a situation that is ripe for workers and employers to begin resenting each other, by creating a zero-sum dynamic where if one side wins, the other loses. Keep in mind, this is contradictory to the original intent of the SCA. An SCA is supposed to create a balance between service worker compensation, reasonable profit for the employer, and value for the American taxpayer.
Hence, Congress should immediately enact legislation that would create a regulatory framework for employers to apply to the federal government to increase salaries and benefits for their employees, in response to legitimate conditions.
Finally, let’s be honest. Congress needs to take this on soon before the midterm elections, where Republicans may take control of the House, the Senate, or even both. Paying government workers more is nothing that the GOP will ever support, which is a shame. Because all Americans benefit when government contract workers do their job well because they are fairly compensated. Congress must address the outdated Service Contract Act to help American taxpayers get the best bang for their buck.
Ronnie Shows, a Democrat, represented Mississippi’s 4th Congressional District from 1999-2003.
