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Top Execs Receive $24 Billion From Federal Contracts Each Year

Mike Hower
| Wednesday October 2nd, 2013 | 0 Comments
Photo Credit: Flickr eGuide Travel

Photo Credit: Flickr eGuide Travel

Speaking of federal government spending, new research from think tank Demos has found that the current contracting practices from the federal government pays top corporate executives nearly $24 billion per year. Of course, only time will tell if these bills will actually get paid during the current federal government shutdown.

The organization postulates that if these contracting policies were reformed to limit the taxpayer contribution to executive pay at the salary of the U.S. Vice President ($230,700), then full-time workers could potentially receive an annual pay increase of nearly $14,000, with no additional cost to taxpayers.

Demos points to a Government Accountability Office (GAO) finding that taxpayers currently subsidize more than $760,000 per year toward the compensation of contracting executives, who often earn millions of dollars annually — more than half a million dollars more than what the Vice President makes.

The GAO numbers indicate that between $20.8 and $23.9 billion each year goes to executive pay at the companies that contract with the government. The think tank says that recouping close to $7 billion of the total that goes to pay above the Vice Presidential salary mark would free up enough taxpayer money to raise wages at those companies by up to $6.69 per hour, or $13,902 per year for a full-time employee.

Many of these workers have a tough time getting by on their current wages. In recent months, several janitorial workers, retail service workers and fast food workers have gone on strike to demand higher pay and more consistent schedules.

A previous report from Demos found that government contracts support nearly two million low-wage private sector jobs — more than Walmart and McDonald’s combined. Many of these workers are paid $12 or less per hour.

Demos says the U.S. has a history of ensuring tax dollars provide decent jobs.

From the 1931 Davis-Bacon Act to Executive Order 11246 of 1965, and a host of other laws and executive actions, our laws have mandated that companies working on behalf of the American people are upholding high standards of employment practices,” Demos said in the report. “Yet as the nature and prevalence of federal contracting, lending and grant-making have changed, and some laws have been weakened, working people have fallen through the cracks.”

Lawmakers have faced mounting pressure to raise the federal minimum wage for fast food and retail workers across the country, but with conservatives in control of the House of Representatives, progress has been slow. However, President Obama could exercise his executive power to change the rules governing federal contracts to ensure more equitable pay. Seventeen members of the Congressional Progressive Caucus urged him to do just that in a July letter.

In recent decades, the ratio of executive pay to worker pay has increased dramatically, with the most recent data showing it is 273-to-1. Average CEO compensation hit $14.1 million in 2012, up more than a third from 2009, according to a report by the Economic Policy Institute (EPI).

Based in San Francisco, Mike Hower is a writer, thinker and strategic communicator that revels in driving the conversation at the intersection of sustainability, tech, politics and law. He studied Political Science and History at the University of California, Davis and has spent time working for the United States Congress in Washington, D.C., helping Silicon Valley startups with public relations campaigns and teaching in South America. Mike also regularly writes for Sustainable BrandsHe would like to add that he is hopelessly addicted to travel and has a borderline unhealthy obsession with his golden retriever, Gerico. Connect with him on LinkedIn or follow him on Twitter (@mikehower).

 


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