The Biggest Creator of Low-Wage Jobs? Uncle Sam

Who employs more low-wage workers than Walmart and McDonald’s combined? You do.

A new study from Demos estimates that American taxpayers fund nearly 2 million low-wage jobs that pay workers less than $24,000 a year ($12 an hour or less). These private-sector jobs are generated by federal contracts, grants, loans and other programs (see chart).

Workers making $12-or-less an hour say that they are scraping by. Often on public assistance, they find it difficult to afford basic necessities like rent, food, health care and utilities. Because of sequestration, pressure on government agencies to spend less money may add even more to their ranks.

The prevalence of low-wage jobs is part of a larger trend as the nation continues to recover from the recession. The Washington Post notes that most of the 165,000 jobs added in April were low-wage jobs. A 2012 National Employment Law Project report found that 3 out of 5 jobs added during the recovery have been low-wage jobs, even though only 1 in 5 jobs lost during the recession were low wage.

The increasing number of low-wage jobs exacerbates the growing inequality gap between the richest and the poorest. As Jim Tankersley and Marjorie Censer report in The Washington Post, the disparity between CEO and government-contract worker pay is pronounced, particularly inside the Beltway.

The findings highlight inequality within the government contracting industry; as chief executives of major contractors rake in millions, many contract employees are struggling to get by, the report contends.

President Barack Obama fist-bumps AbilityOne custodian, Lawrence Lipscomb, in a federal office building. Credit: Official White House Photo by Pete Souza. (PRNewsFoto/AbilityOne, Pete Souza)

The area is home to many of the highest-paid contracting chief executives — the new Lockheed Martin CEO’s base salary alone is $1.38 million — and about 15 percent of low-wage contract workers, Demos estimates.

Stephen S. Fuller, director of George Mason University’s Center for Regional Analysis, said he has seen lower-wage jobs move over time from the federal workforce to contracted positions, particularly in the Washington area.

“Those were contracted out because they were cheaper,” he said, pointing to security and transportation jobs, among others. “The contract workers get fewer paid vacation days, fewer sick-leave [days]. They often work hourly, so you get what you pay for.”

Amy Traub, a senior policy analyst at Demos told The Post that “growing inequality and these larger, dead-end jobs are a national problem.” The report was announced Wednesday at an event at Washington, DC’s Union Station launching Good Jobs Nation, a new initiative started by a coalition of low-wage workers, labor, faith and community organizations calling on the Obama administration to help government-contracted workers enter the middle class by requiring better salaries and benefits.

Watch members of Good Jobs Nation at Wednesday’s DC event.