In a recent op-ed in the Washington Post, Eugene Scalia and Rachel Mondl call on the federal courts to overturn President Obama's executive order requiring most federal contractors to pay their workers at least $10.10 an hour. Scalia and Mondl take issue with the order on the ground that its stated rationale -- raising low-paid workers' wages improves productivity and performance -- "is not credible" and that the order therefore exceeds the president's power under the Federal Property and Administrative Services Act to issue directives to promote "economy and efficiency" in contracting.
The effect of Scalia and Mondl's proposal would be to subject federal procurement to judicial micromanagement in the name of a narrow and unrealistic understanding of contracting policy goals.
As Scalia and Mondl acknowledge, in using his executive authority to set contracting standards, President Obama is following long-standing precedent. In fact, over the past 70 years, every presidential administration has issued executive orders on contracting across a broad range of policy areas, including: notification of workers' legal rights, immigration compliance, price controls, minority business opportunities, and environmental sustainability. Most importantly -- and unmentioned by Scalia and Mondl -- the line of executive orders from Franklin Roosevelt's Executive Order 8802, prohibiting race discrimination in military contracting, to Lyndon Johnson's order creating the Office of Federal Contract Compliance Programs, is generally regarded as laying the foundations of contemporary equal opportunity law.
The federal courts have repeatedly rejected arguments that these orders were illegal because they did not improve economy and efficiency. Indeed, not a single executive order has been overturned on this basis. In case after case, the courts have applied the principles set out by the DC Circuit in its 1979 Kahn decision -- that "'economy' and 'efficiency' are not narrow terms" but include "quality, suitability, and availability of goods or services" as well as price, and that Congress intended the procurement act to give the president "direct and broad-ranging authority over those larger administrative and management issues that involve the Government as a whole." Accordingly, the courts have upheld the legality of contracting orders in the face of arguments that they would tend to raise contractor costs and bid prices.
Nevertheless, Scalia and Mondl assert that the minimum wage order is so contrary to "basic economics" that "the courts" should seize their "chance to begin placing limits on a power that has been abused by Democratic and Republican presidents alike."
The core of their argument is that the order states that raising wages for the low-paid workers will produce cost savings and that claim does not make sense because if raising wages lowered costs, suppliers would already be doing it. But the order does not claim that raising wages will promote economy and efficiency by simply reducing costs. It states that raising the pay of low-wage workers "increases their morale and the productivity and quality of their work" and that "[t]hese savings and quality improvements," in combination, "will lead to improved economy and efficiency in Government procurement." The argument the order actually makes, rather than the one Scalia and Mondl say it makes, is both reasonable and fully within the broad conception of economy and efficiency recognized by the federal courts.
To illustrate, consider the effect of the order on the contracted-out security officers who guard most federal buildings. Even assuming raising the guards' wage rate tended to increase overall costs after taking into account savings from reduced turnover and higher productivity, the use of more experienced and motivated guards would still mean that the government was getting better service and therefore better value for its contract dollars. The Gap's recent decision to raise its minimum pay to 10 dollars an hour to promote high quality customer service shows that some major employers of low-wage workers understand this logic.
Finally, in their eagerness to subject federal contracting to their conception of economic rationality, Scalia and Mondl miss the obvious point that the U.S. government is not simply a private purchaser looking for the best deal it can find in the marketplace. When the government does business with poverty-wage employers, taxpayers end up effectively subsidizing these firms' low standards as workers are forced to resort to means-tested public benefits like SNAP, Medicaid, and Earned Income Tax Credits.
The minimum-wage order is good policy and well-grounded in legal precedent. The courts should decline Scalia and Mondl's invitation to substitute their faulty economic logic for the President's judgment that well-paying contracting can be good both for federal taxpayers and low-wage workers.