Sunday, January 08, 2006

Wages and Government

Wage Determination Process Could Benefit from Greater Transparency, and Better Use of Violation Data Could Improve Enforcement

Recipients of federal government contracts for services are subject to wage, hour, benefits, and safety and health standards under the McNamara-OÂ’Hara Service Contract Act (SCA) of 1965, as amended, which specifies wage rate and other labor standards for employees of contractors.

The McNamara-O'Hara Act basically set a differentiated form of Minimum Wage for Federal Service Contract employees. The separation of Federal employees from other American labor was a fundamental flaw in the economic sense, guaranteeing basic protections to Federal employees not granted to the Private Sector. The Dept. of Labor took the enactment, and transformed it into a bureaucratic nightmare, defying the transparency for which the GAO cries.

In 2002, the Department of Labor (DOL) estimated there were about 60,000 federal service contracts.

DOLÂ’s Employment Standards AdministrationÂ’s (ESA) Wage and Hour Division (WHD) administers the SCA and each year determines prevailing wage and fringe benefit rates for approximately 300 standard service occupations, such as janitor and cafeteria worker, in 205 metropolitan areas. SCA also authorizes DOL to conduct investigations to enforce contractor compliance with SCA provisions.

The WHD operates an Occupational classification system which overly complicates the Issue involved. There should be only 7 Wage levels existent at most, based upon Education and Training level, combined with economic productivity estimates of the Occupation (in reality, the replacement cost of current Workers). All Occupations should be placed within these Wage levels, rather than using the outdated Directory of Occupations which the DOL now uses. Second, there should be only approximately three Living Costs sectors--based upon average Income levels existent in the Private Sector independent of geographical limitations or expansions. The key here is the exact location of the Work, and the Cost of living there as expressed by Private Sector incomes. The three levels would be Below-Average, Average, and Above-Average.

The major point within the Discussion is the overall distortion in economic Wages coming from Federal Employees holding specialized protection from economic hazard. This is not to say Federal Employees should be stripped of their protection under the McNamara-O'Hara Act, but to say this protection should be expanded to all American Labor. Much would have to be done prior to this intervention, though it could be accomplished in a economic Cost-effective manner. A realistic Retirement program would have to be initiated, the scope of the Plan simplified to as great a degree as possible.

Some Points on Retirement Plans:
1) All should be scaled to provide 40% of Income level at Retirement
2) This percentage of Income should equate to the average Minimum Wage income, with a 5% increase per Income level.
3) The Income levels should be defined through the Income Tax Returns filed.
4) The Retirement program should be entirely financed by Worker and Employer paying equally.
5) It should be separate from Social Security--which will be transferred to proven need to be eligible--and transferable between Employers (carried with the Worker).

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