Economic Snapshot | Budget, Taxes, and Public Investment

Outsourced federal jobs more likely to be low-wage

Economic Snapshot for February 11, 2009

Federal contract jobs leave one-in-five in poverty

by Kathryn Edwards

The federal contract workforce—government workers paid with federal dollars but employed by private business—is swelling in size. Although the number of directly employed federal workers has remained steady at 2.7 million since 2000,1 federal contract workers have grown from 1.4 million to 2.0 million.2

One in five federal contract workers make below poverty threshold wage 

The cause for this increase is the federal government’s expanded outsourcing of its operations. Federal contract spending—the money federal agencies pay to private businesses for goods and services—has increased 69% (to $415 billion) between FY 2000 and FY 2006 (the last year of available data).3 This spending on outsourcing constituted 16% of all federal outlays.4

This is a troubling development. An estimated 20% of federal contract workers make a wage below the poverty threshold.5 In addition, these workers are less likely to have some form of health care or retirement benefits. In short, the United States essentially has two federal workforces: one to which the government is accountable, and one to which it is not.

Contracting is done under the mantra of greater efficiency, but much of this “cost-saving” comes from the willingness and ability of private contractors to push down wages and benefits. In short, the government is spending more money than ever that encourages lower wage jobs.

For more information on this issue, see also the EPI Issue Brief,  Outsourcing poverty: Federal contracting pushes down wages and benefits.


1. Employment, Hours, and Earning survey from the Current Employment Statistics of BLS, includes federal postal workers.

2. The Federal government does not collect data on federal contract workers. This number is an estimate using the General Services Administration’s Federal Procurement Data System and the Employment Requirements Matrix from the Bureau of Labor Statistics.

3. Spending is in real terms, adjusted for inflation using the Consumer Price Index for All Urban Consumers Research Series (CPI-URS).

4. Budget of the United States Government, Fiscal Years 2000 and 2006, Office of Management and Budget. 

5. The Federal Poverty Threshold is determined yearly by the U.S. Census Bureau Housing and Household Economic Statistics Division.