Most carpet-layers in Peoria make $10.27 an hour or less, but the government requires federal contractors to pay at least $22.23 an hour for the same work in the Illinois city.
In Troy, Mich., most painters make $13.05 an hour or less, yet every painting company doing business with the federal government must pay its painters at least $26.60.
Across the country, employees of companies with federal contracts make up to twice what others doing the same work in the region earn, dramatically increasing the cost to taxpayers, a Washington Examiner analysis found.
Under the Service Contract Act of 1965, contractors are paid a minimum wage determined to be “prevailing” in the area by the Labor Department.
But those “prevailing wages” are often far off the mark, according to the analysis, which compared them with far more authoritative figures compiled by the Bureau of Labor Statistics. People laboring for Uncle Sam getting paid far more than those doing the same work in the free market, although they make less in some areas.
Washington-based bureaucrats “rely on professional judgment when calculating wage rates,” according to the Government Accountability Office. The GAO sets wage levels in 339 occupations across 390 regions.
GAO officials use BLS rates as one metric, but then make assumptions and adjustments. If they don't know what one job entails, they will apply the rate of another that sounds similar. They don’t make their methodology public, and the legislation doesn’t define the terms “prevailing” or specify the boundaries of areas.
Bureaucrats at times set the prevailing wage to the rate that union workers earned “with no evidence or only oral assurance from union representatives that union rates prevailed," the GAO found.
The SCA also requires that the Labor Department give “due consideration” to what federal employees would be making doing similar jobs, seemingly defeating the purpose of outsourcing to save money.
Though they err in both directions, the government’s estimates were two to three more times likely to pay a contractor more than the local median than less, the Examiner analysis found.
The government-mandated wage is actually only the floor. But Stan Soloway, CEO of the Professional Services Council, a trade association for government contractors, maintained that most merely pay the minimum, or it “is not going to be able to win the contract.“
That would seemingly lead to a flat wage structure where workers have little incentive to work hard or improve their skills because junior workers are paid the same as top performers. It might also shed light on a contracting culture that has seen myriad failures in recent years.
Contractors who do want to keep talent then wind up paying far more than the minimum, the GAO said.
Most contractors contacted by the Examiner appeared unworried, since they only must win business over fellow federal contractors beholden to the same rules. The higher wage costs are built in to the prices paid by the government, which leaves only taxpayers as losers.
As early as 1983, the GAO said the SCA was duplicative and unnecessary because of other wage protections such as the Fair Labor Standards Act.
In addition to creating their own custom geographical districts, SCA administrators rely on their own job categories, which are rarely updated, making it difficult to deal with occupations like computer programming.
“For example, an issue was raised of whether it was more appropriate to classify the occupation ‘truck dispatcher’ as an administrative, clerical, technical, or professional position, when each category brings with it a different level of wages and benefits,” the GAO wrote in 2005.