Obama may make `living wage factor in contracts (AP)

WASHINGTON – Companies that pay workers "living wages" and offer generous benefits could gain an advantage in bidding on government contracts under a new policy the White House is considering.

The policy, known as "high road" contracting, could draw the Obama administration into a larger debate over whether the government should use public purse strings to strengthen the middle class and promote higher labor standards.

Business groups who oppose the plan say it would shut out smaller firms from competing for more than $500 billion a year in federal contracts and increase government procurement costs.

The plan's advocates include unions. They say too many jobs financed by government contracts come with low wages and limited benefits and support companies that violate employment laws.

The Economic Policy Institute, a liberal think tank, estimates that nearly 20 percent of the 2 million federal contract workers in the U.S. earn less than the poverty threshold wage of $9.91 per hour.

Documents obtained by The Associated Press show the plan under consideration would examine the wages and benefits — such as health insurance, retirement benefits and paid leave — a firm pays its employees as a factor in the contract award process. Another factor would be whether a contract bidder is a repeat violator of labor and employment laws.

A Labor Department compliance office would compile a score on contract bidders based on the criteria.

Earlier this month, a group of four Republican senators led by Sen. Susan Collins of Maine wrote a letter to Budget Director Peter Orszag arguing that imposing such a policy could increase the cost of federal contracting and hurt small businesses.

David Madland, director of the American Worker Project at the Center for American Progress, a liberal think tank, said there is evidence that better-paid workers are more efficient and productive. Local governments with similar plans found raising standards increased competition because more companies are willing to bid on government contracts, he said.