Government Contracts and Procurement

Latest story

125 Shares27 Views

Trump and DOGE Create Anxiety but Opportunity for Federal Contractors

by

By cutting federal employees, the Trump administration may increase its reliance on firms that take in billions through government contracts.A contracting firm called Leidos took in more than $16 billion in revenue last year, most of it through contracts with federal agencies like the Department of Veterans Affairs.So when the Trump administration’s budget cutters took aim at the V.A. last month, it seemed like bad news not just for the department’s employees but also for Leidos and dozens of other private-sector firms.“No more paying consultants to do things like make Power Point slides and write meeting minutes!” the department’s secretary, Doug Collins, wrote on X. Overall, the department said, it was canceling more than 850 contracts worth nearly $2 billion.But shortly after Mr. Collins’s announcement, the outlook for some of the V.A.’s contractors seemed to brighten. The department put the cancellations on pause, saying it needed to review the contracts to avoid “eliminating any benefits or services” to veterans or V.A. beneficiaries. It later narrowed the list of canceled contracts by a few hundred.And experts on government contracting said cuts to the agency, which announced last week that it was seeking to trim 80,000 of its roughly 480,000 employees, could even lead to increased spending on federal contracts.These experts noted that cutting employees without reining in a government function — like providing health care and benefits to veterans, work in which Leidos plays a key role — typically means the job will fall more heavily on contractors.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

More stories

  • 63 Shares99 Views

    in Economy

    Biden Cuts Intel’s Chip Award

    by

    The Silicon Valley company will receive less money from the CHIPS Act after winning a $3 billion military contract and changing some of its investment commitments.The Biden administration said Tuesday that it would award up to $7.86 billion in direct funding to Intel, with the U.S. chip giant set to receive at least $1 billion of that money before the end of the year.The money is a reduction from Intel’s preliminary award of $8.5 billion, which President Biden announced during a visit to the company’s Arizona plant in March. The Commerce Department said it had reduced Intel’s grant because the chip maker, the biggest recipient of money under the CHIPS Act, also received a $3 billion contract to make semiconductors domestically for the military.But the Commerce Department also detailed in a project document that Intel, which is under financial pressure because of a sales slump, had extended timelines for some projects beyond a 2030 government deadline.The company now plans to invest $90 billion in the United States by the end of the decade, after previously saying it would spend $100 billion over the next five years. It also reduced the estimated jobs it would create in Ohio, where it will require 3,500 fewer employees than the 10,000 it previously estimated, the Commerce Department said.Commerce and Intel officials said those changes weren’t a factor in the final award.Intel’s shifting timeline and jobs projections speak to the challenges the Biden administration has run into as it tries to rev up domestic chip-making. The CHIPS Act, a bipartisan bill passed in 2022, provided $39 billion to subsidize the construction of facilities to help the United States reduce its reliance on foreign production of the tiny, critical electronics that power everything from dishwashers to iPads.Nailing down its CHIPS award has been a priority for Intel, which last month reported the biggest quarterly loss in the company’s 56-year history. It has been cutting costs and fending off takeover interest from rivals, after the total value of the company fell to around $107 billion, from $500 billion in 2000. (Other chip makers have also been facing challenges, because of a cyclical slump in the industry.)We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • 138 Shares149 Views

    in Economy

    Europe Rushes to Build Defenses But With Little Consensus on How

    by

    At Saab’s sprawling combat production center in Karlskoga, Sweden, the 84-millimeter shells that can take out a battle tank in a single stroke are carefully assembled by hand. One worker stacked tagliatelle-shaped strips of explosive propellant in a tray. Another attached the translucent sheafs around the rotating fins of a guiding system.Outside the squat building, one of hundreds in the guarded industrial park, construction is underway on another factory. Capacity at this plant — a few minutes’ drive from the home of Alfred Nobel, the inventor of dynamite and founder of the peace prize — is scheduled to more than double in the next two years.The enlargement is part of a titanic expansion in military spending that every country in Europe has undertaken since Russia invaded Ukraine 18 months ago. Yet the mad dash by more than 30 allied countries to stockpile arms after years of minimal spending has raised concerns that the massive buildup will be disjointed, resulting in waste, supply shortages, unnecessary delays and duplication.“Europeans have not addressed the deeply fragmented and disorganized manner in which they generate their forces,” a recent report from the Center for Strategic and International Studies said. “Investing more in an uncoordinated manner will only marginally improve a dysfunctional status quo.”The North Atlantic Treaty Organization, which sets overall defense strategy, and the European Union have pushed for greater cooperation and integration, creating several new initiatives, including one to coordinate weapons procurement.Manufacturing shells at a Saab facility in Karlskoga, Sweden.Loulou d’Aki for The New York TimesAnother step in the production at the Karlskoga facility.Loulou d’Aki for The New York TimesCleaning the main charges on the production line.Loulou d’Aki for The New York TimesStill, a growing chorus of weapons manufacturers, political figures and military experts warn the efforts fall far short of what is needed. “There needs to be some clarity since we’re not the United States of Europe,” Micael Johansson, the president and chief executive of Saab, explained from the company’s headquarters in Stockholm. “Every country decides themselves what type of capabilities they need.”Each country has its own strategic culture, procurement practices, specifications, approval processes, training and priorities.Alliance members may sometimes use the same aircraft but with different encryption systems and varying instruments. As Ukrainian soldiers have discovered, 155-millimeter shells produced by one manufacturer do not necessarily fit into a howitzer made by another. Ammunition and parts are not always interchangeable, complicating maintenance and causing more frequent breakdowns.The European Union does not “have a defense planning process,” said Mr. Johansson. This summer, he was appointed vice chairman of the board at the Aerospace and Defense Industries Association of Europe, a trade association representing 3,000 companies. “NATO has to rethink how do we create resilience in the whole system,” including supply chains that produce the munitions soldiers use on the battlefield.Saab’s president and chief executive, Micael Johansson, at the company’s headquarters in Stockholm.Loulou d’Aki for The New York TimesCrucial raw materials like titanium and lithium, as well as sophisticated electronics and semiconductors, are in great demand.And there is a shortage of explosives, particularly powder, which manufacturers across the entire weapons industry depend on. But there has been little detailed discussion about which systems should get priority or how the supply of powder as a whole could be increased.“I suggested it,” Mr. Johansson said, “but it hasn’t happened yet.”The discussions are taking place at a time when the resilience of far-flung supply chains of all kinds are being re-examined. Memories are still fresh of interruptions in the flow of natural gas and grain resulting from the war in Ukraine, not to mention the severe backlogs in the production and delivery of goods and materials caused by the Covid pandemic.The big trend now, said Michael Hoglund, head of business area ground combat at Saab, is to bring supply chains closer to home and to create reliable backups. “We’re no longer buying the cheapest,” he said. “We’re paying a fee to feel safer.”Workers on the production line.Loulou d’Aki for The New York TimesAssembling a weapon.Loulou d’Aki for The New York TimesCoordinating supplies is just one element. Getting a jumble of varying weapons systems, practices and technologies to smoothly perform in concert has always been a challenge. NATO has set standards so that the different systems are compatible — what is known as interoperability.The practice, though, can be less than harmonious.The European Defense Agency’s annual review last year found that only 18 percent of defense investments are done together, half of the targeted amount. “The degree of cooperation among our armies is very low,” Josep Borrell, the European Union’s top diplomat, said at the time.Sweden is on the cusp of joining NATO, but it has partnered with the military alliance before, and Saab, which produces a range of weapons systems including the Gripen fighter jet, sells to scores of countries around the world.Managers there have seen some of the challenges to coordination up close in large and small ways.A Gripen aircraft at the Saab test center in Linkoping.Loulou d’Aki for The New York TimesJakob Hogberg, a Gripen test pilot, discussing the aircraft.Loulou d’Aki for The New York Times“The whole system in each army is built up in a special way,” said Gorgen Johansson, who oversees the Karlskoga operation. (He is not related to the chief executive.) Behind him sat an empty green tube used to launch Saab’s shoulder-fired NLAW anti-tank missile. It was signed by Ukraine’s former minister of defense and returned to its maker as a token of appreciation.Some customers, he said, want two launchers packed in a single box, another wants four, or six, because they have bought vehicles and equipment that can hold different numbers of launchers.Mr. Johansson said that until very recently, it was impossible to get the players to even talk about standardizing where labels were positioned or what color they should be.Bigger problems remain. After the Cold War ended, there was an enormous consolidation of defense companies as military spending shrank. Still, like varying brands of cereal, there is a wide range of each major weapons system. Europe has 27 different types of howitzers, 20 types of fighter jets and 26 types of destroyers and frigates, according to an analysis by McKinsey & Company.In building a unified fighting force, Europe must balance competition, which can result in improvements and innovation, with the need to eliminate waste and streamline operations, by ordering or even designing weapons in concert.Underlying the once-in-a-generation military expansion is that the continent is still primarily dependent on the United States for its safety. President Trump’s complaints in 2018 of insufficient spending in Europe and veiled threats to withdraw from NATO profoundly shook the region.A staff member collecting equipment from a tank used as a target at a test center.Loulou d’Aki for The New York TimesHolding up shrapnel that hit the target after a firing exercise.Loulou d’Aki for The New York TimesBut the view that Europe has to take more financial responsibility for its own defense is now widespread, urgently ratcheting up the pressure to better unify Europe’s defenses.Coordination, though, faces several built-in hurdles. As the center’s report concluded, integrating European defense “will be a slow laborious process and a generational effort.”Governments are already funneling millions or billions of dollars to defense and, naturally, every one wants to support its own industries and workers.And whatever Europe’s overall defense needs may be, each nation’s first priority is protecting their borders. There is limited trust even among alliance members.“We think we are friends,” said Gorgen Johansson in Karlskoga. But he noted that during the pandemic when there was a shortage of ventilators, Germany, which had a surplus, stopped supplying them to Sweden, Italy and other countries in need.“The talks have started,” Mr. Johansson said of efforts to improve coordination. “Do I think it will go quickly? No.”Working on a plane at Saab’s fighter production facility in Linköping.Loulou d’Aki for The New York TimesWorkers assembling an aircraft in Linköping.Loulou d’Aki for The New York Times More

  • 113 Shares189 Views

    in Economy

    Baby Formula Shortage Has an Aggravating Factor: Few Producers

    by

    With just a handful of companies making U.S. infant formula, a shutdown of Abbott’s plant had outsized impact on the supply.In the early 1990s, the nation’s biggest makers of baby formula were under fire.The three largest manufacturers, which controlled 90 percent of the U.S. market at the time, were hit with waves of state, federal and corporate lawsuits, accusing them of attempting to limit competition and using their control of the industry to fix prices. Most of the lawsuits were settled or, in some cases, won by the companies.Three decades later, the $2.1 billion industry is still controlled by a small number of manufacturers, who are again in the cross hairs over their outsized market share.The infant formula market was plunged into disarray when Abbott Laboratories voluntarily recalled some of its most popular powdered formulas in February and shut down its plant in Sturgis, Mich., after four babies who had consumed some of Abbott’s products became sick with bacterial infections.Abbott, which controls 48 percent of the market, has said there was no evidence its formula caused any known infant illnesses and that none of the tests performed by regulators have directly linked the cans of formula the babies consumed to the strains of bacteria, Cronobacter sakazakii, found at the plant.But the ripple effects from that single plant closing have been widespread, highlighting the market power of a single manufacturer and the lack of meaningful competition in an industry governed by rules and regulations designed to protect the incumbents.Stores are limiting purchases of baby formula, with shelves in many markets completely bare. Panicked parents of newborns are calling on friends and family to help locate food for their babies, with some resorting to making their own formula at home. And while the Abbott plant was given the green light this week to start manufacturing again — a move that will still take weeks to rebuild inventory on store shelves — there are growing calls from lawmakers for major changes to how the industry operates.“When something goes wrong, like it has here, you then have a major, serious crisis,” said Representative Rosa DeLauro, a Connecticut Democrat who released a scathing 34-page whistleblower report from a former Abbott employee detailing safety and cleanliness issues at the Sturgis plant. She argued that the industry should be broken up and efforts should be made to promote competition to avoid future shortages.Senator Tammy Duckworth, an Illinois Democrat, urged the Federal Trade Commission last week to conduct a broad study of the infant formula industry and whether market consolidation has led to the dire shortages. Top Biden administration officials have also lamented the power of a few players. On Sunday, Transportation Secretary Pete Buttigieg said the Biden administration should do more to address the industry’s “enormous market concentration.”“We’ve got four companies making about 90 percent of the formula in this country, which we should probably take a look at,” Mr. Buttigieg said on CBS’s “Face the Nation.”Read More on the Baby Formula Shortage A Desperate Search: As the United States faces a baby formula shortage, some parents are rationing supplies, or driving for hours in search of them. A Misleading Narrative: Amid the crisis, Republicans have suggested that the Biden administration is sending baby formula to immigrants at the expense of American families. An Emotional Toll: The shortage is forcing many new mothers to push themselves harder to breastfeed and look for ways to start again after having stopped. What Not to Do: As they struggle to cope, some parents have resorted to strategies like watering down their formula. But there are risks.Today, Abbott is the biggest player. Mead Johnson, which is owned by the conglomerate Reckitt Benckiser, and Perrigo, which makes generic formula for retailers, control another 31 percent. Nestlé controls less than 8 percent.In part, the lack of competition stems from simple math: Few companies or investors are eager to jump into the infant formula industry because its growth is tied to the nation’s birth rate, which held steady for decades until it began dropping in 2007.But the factors that long ago led to the creation of an industry controlled by a handful of manufacturers are primarily rooted in a tangled web of trade rules and regulations that have protected the biggest producers and made it challenging for others to enter the market.The United States, which produces 98 percent of formula consumed in the country, has strict regulations and tariffs as high as 17.5 percent on foreign formula. The Food and Drug Administration maintains a “red list” of international formulas, including several European brands that, if imported, are detained because they do not meet U.S. requirements. Those shortcomings could include labels that are not written in English or do not have all of the required nutrients listed. This week, the F.D.A. said it would relax some regulations to allow for more imports into the United States.Trade rules contained in the United States Mexico Canada Agreement, which replaced the North American Free Trade Agreement, also significantly discourage Canadian companies from exporting infant formula to the United States. The pact established low quotas that trigger export charges if exceeded. American dairy lobbying groups had urged officials to swiftly pass the agreement and supported the quotas at the time.But perhaps the biggest barrier to new entrants is the structure of a program that aims to help low-income families obtain formula. The Special Supplemental Nutrition Program for Women, Infants, and Children, better known as WIC, is a federally funded program that provides grants to states to ensure that low-income pregnant or postpartum women and their children have access to food.The program, which is administered by state agencies, purchases more than half of all infant formula supply in the United States, with about 1.2 million infants receiving formula through WIC.State WIC agencies cannot just buy formula from any manufacturer. They are required by law to competitively bid for contracts and select one company, which becomes the exclusive provider of formula for all WIC recipients in the state. In exchange for those exclusive rights, manufacturers must provide states significant discounts for the formula they purchase.David E. Davis, an economics professor at South Dakota State University, said that exclusive system could make it more difficult for smaller companies to break through. Although manufacturers may sell products to states below cost, Dr. Davis’s research found that brands that secure WIC contracts gain greater prominence on store shelves, creating a spillover effect and resulting in larger sales among families that are not WIC recipients. Doctors may also preferentially recommend those brands to mothers, his research found.The formula shortage is causing retailers to limit purchases, with shelves in many markets completely bare.Kaylee Greenlee Beal for The New York Times“If you don’t have the WIC contract, you’re pretty much a small player,” Dr. Davis said. “Because that locks you out of the WIC market and it pretty much locks you out of the non-WIC market. So firms bid very aggressively to get the WIC contract.”Only three companies have contracts to supply formula through the program: Abbott makes up the largest share, providing formula to about 47 percent of infants that receive WIC benefits, while Mead Johnson provides 40 percent and Gerber, which is manufactured by Nestlé, provides 12 percent, according to the National WIC Association.Navigating the Baby Formula Shortage in the U.S.Card 1 of 6A growing problem. More

  • 138 Shares99 Views

    in Economy

    Russian Shipping Traffic Remains Strong as Sanctions Take Time to Bite

    by

    WASHINGTON — Shipping traffic in and out of Russia has remained relatively strong in the past few months as companies have raced to fulfill contracts for purchases of energy and other goods before the full force of global sanctions goes into effect.With the European Union poised to introduce a ban on Russian oil in the coming months, that situation could change significantly. But so far, data show that while commerce with Russia has been reduced in many cases, it has yet to be crippled.Volumes of crude and oil products shipped out of Russian ports, for example, climbed to 25 million metric tons in April, data from the shipping tracker Refinitiv showed, up from around 24 million metric tons in December, January, February and March, and mostly above the levels of the last two years.Jim Mitchell, the head of oil research for the Americas at Refinitiv, said that Russia’s outgoing shipments in April had been buoyed by the global economic recovery from the pandemic, and that they did not yet reflect the impact of sanctions and other restrictions on Russia issued after its invasion of Ukraine on Feb. 24.Crude oil typically trades 45 to 60 days ahead of delivery, he said, meaning that changes to behavior following the Russian invasion were still working their way through the system.“The volume has been slow to decline, because these were contracts that have already been set,” Mr. Mitchell said. Defaulting on such contracts is “a nightmare for both sides,” he said, adding, “which means that even in the current environment nobody really wants to breach a contract.”Russia has stopped publishing data on its imports and exports since Western governments united to announce their array of sanctions and other restrictions. Exports of oil or gas that leave Russia through pipelines can also be difficult for outside firms to verify.But the global activities of the massive vessels that call on Russian ports to pick up and deliver containers of consumer products or bulk-loads of grain and oil are easier to monitor. Ships are required to transmit their identity, position, course and other information through automatic tracking systems, which are monitored by a variety of firms like Refinitiv, MarineTraffic, Kpler and others.These firms say that shipping traffic was relatively robust in March and April, despite the extraordinary tensions with Russia since its invasion of Ukraine. That reflects both how long some of the sanctions issued by the West are taking to come into effect and an enduring profit motive for trading with Russia, especially after prices for its energy products and commodities have cratered.Data from MarineTraffic, for example, a platform that shows the live location of ships around the world using those on-ship tracking systems, indicates that traffic from Russia’s major ports declined after the invasion but did not plummet. The number of container ships, tankers and bulkers — the three main types of vessels that move energy and consumer products — arriving and leaving Russian ports was down about 23 percent in March and April compared with the year earlier.“The reality is that the sanctions haven’t been so difficult to maneuver around,” said Georgios Hatzimanolis, who analyzes global shipping for MarineTraffic.Tracking by Lloyd’s List Intelligence, a maritime information service, shows similar trends. The number of bulk carriers, which transport loose cargo like grain, coal and fertilizer, that sailed from Russian ports in the five weeks after the invasion was down only 6 percent from the five-week period before the invasion, according to the service.In the weeks following the invasion, Russia’s trade with China and Japan was broadly stable, while the number of bulk carriers headed to South Korea, Egypt and Turkey actually increased, their data showed.“There’s still a lot of traffic back and forth,” said Sebastian Villyn, the head of risk and compliance data at Lloyd’s List Intelligence. “We haven’t really seen a drop.”Those figures contrast somewhat with statements from global leaders, who have emphasized the crippling nature of the sanctions. Treasury Secretary Janet L. Yellen said on Thursday that the Russian economy was “absolutely reeling,” pointing to estimates that it faces a contraction of 10 percent this year and double-digit inflation. Earlier this week, Ms. Yellen said that the Treasury Department was continuing to deliberate about whether to extend an exemption in its sanctions that has allowed American financial institutions and investors to keep processing Russian bond payments. Speaking at a Senate hearing, she said that officials were actively working to determine the “consequences and spillovers” of allowing the license to expire on May 25, which would likely lead to Russia’s first default on its foreign debt in more than a century.Global sanctions on Russia continue to expand in both their scope and their impact, especially as Europe, a major customer of Russian energy, moves to wean itself off the country’s oil and coal. Trade data suggest that shipments into Russia of high-value products like semiconductors and airplane parts — which are crucial for the military’s ability to wage war — have plummeted because of export controls issued by the United States and its allies.But many sanctions have been targeted at certain strategic goods, or exempted energy products — which are Russia’s major exports — to avoid causing more pain to consumers at a time of rapid price increases, disrupted supply chains and a growing global food crisis.Truckers lined up to cross into Panemune, Lithuania, near the Russian port of Kaliningrad last month.Paulius Peleckis/Getty ImagesSo far, Western governments have levied an array of financial restrictions, including banning transactions with Russia’s central bank and sovereign wealth fund, freezing the assets of many Russian officials and oligarchs, and cutting off Russian banks from international transactions. Canada and the United States have already banned imports of Russian energy, and also prohibited Russian ships from calling at their ports, but the countries are not among Russia’s largest energy customers.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

  • 88 Shares99 Views

    in Economy

    Biden Adopts Recommendations for Promoting Union Membership

    by

    The White House on Monday released a report outlining several dozen steps it intends to take to promote union membership and collective bargaining among both public and private sector employees.The report is the product of a task force that President Biden created through an executive order in April. A White House statement said the president had accepted the task force’s nearly 70 recommendations.Many of the steps would make it easier for federal workers and employees of contractors to unionize, including ensuring that union organizers have access to employees on federal property, which does not always happen today.The report also recommends creating preferences in federal grant and loan programs for employers who have strong labor standards, preventing employers from spending federal contract money on anti-union campaigns and making employees aware of their organizing rights.When the task force was created, some White House officials indicated that they supported considering labor union membership as a factor in awarding government contracts, but the task force recommendations generally did not emphasize this approach.Under federal procurement law, the government generally cannot deny contracts to companies it deems hostile to labor unions. But it may be able to consider a company’s posture toward unions as a factor in certain narrow cases — for example, when labor strife resulting from an aggressive anti-union campaign could substantially delay the provision of some important good or service.The executive order Mr. Biden signed creating the task force required it to submit recommendations within 180 days, at which point the president would review them.One key premise of the task force was that the National Labor Relations Act, the 1935 law that protects federal labor rights, explicitly encourage collective bargaining, and yet, according to the Biden White House, no previous administration had explored ways that the executive branch could do so systematically.The ambition of the task force was twofold: to enact policies for federal agencies and contractors that encourage unionization and to model best practices for employers in the public and private sectors.The president’s task force will submit a second report describing progress on its recommendations and proposing additional ones in six months.Union officials and labor experts consider Mr. Biden to be among the most pro-labor presidents ever. He moved quickly to oust Trump appointees viewed as unsympathetic to labor and to undo Trump-era rules that weakened protections for workers, and signed legislation that secured tens of billions of dollars to stabilize union pension plans.Mr. Biden has occasionally used his bully pulpit to urge employers not to undermine workers’ labor rights or bargaining positions, as when he warned against coercing workers who were weighing unionizing during a prominent union election at Amazon last year. He later called Kellogg’s plan to permanently replace striking workers “an existential attack” on its union members.Last week, Mr. Biden signed an executive order requiring so-called project labor agreements — agreements between construction unions and contractors that set wages and working conditions — on federal construction projects worth more than $35 million, a move that the White House estimates could affect nearly 200,000 workers. He had previously signed an executive order raising the minimum wage for federal contractors to $15 per hour from $10.95.But despite Mr. Biden’s backing, and polls showing widespread public support for unions, the rate of union membership nationwide remains stuck at a mere 10 percent, its lowest in decades.The Protecting the Right to Organize Act, or PRO Act, which Mr. Biden supports, would make it easier to unionize by preventing companies from holding mandatory anti-union meetings and imposing financial penalties on employers that retaliate against workers seeking to unionize. It passed the House in March but remains a long shot in the Senate. Democrats may seek to pass some of its provisions along party lines this year. More

  • 113 Shares119 Views

    in Economy

    As Workers Gain Pay Leverage, Nonprofits Can’t Keep Up

    by

    Schools and social assistance agencies face staffing shortages as they compete with businesses able to raise wages — and services are suffering.In a Northern California school district, the superintendent is taking shifts as a lunchroom monitor. In Louisville, Ky., nonprofit groups are losing social workers to better-paying jobs at Walmart and McDonald’s. And in Rhode Island, child welfare organizations are turning away families from early-intervention programs because they are short of personnel.The nationwide labor shortage in recent months has led to delayed shipments, long waits at restaurants and other frustrations for customers and employers alike. But many for-profit businesses have been able to overcome their staffing difficulties, at least in part, by offering higher wages to attract workers.For many nonprofit and public-sector employers, however, raising pay isn’t an option, at least without persuading state legislators to approve budget increases or voters to approve higher taxes. That is leading to a wave of departures and rising vacancy rates as their salaries fall further behind their for-profit counterparts. And it is in some cases making it difficult for them to deliver the services they exist to provide.“We’ve lost our ability to be competitive,” said Carrie Miranda, executive director of Looking Upwards, a nonprofit in Middletown, R.I., that works with adults and children with intellectual and developmental disabilities and other health care needs. “When a new person comes to the door, I can’t say yes to them, and they desperately need the services.”Looking Upwards, like many similar organizations across the country, receives most of its funding through state contracts that pay a fixed reimbursement rate for the services they provide. In many states, including Rhode Island, funding levels had been failing to keep up with rising costs even before the pandemic.But the recent acceleration in wage growth, particularly in low-paying industries, has left them hopelessly behind the curve. At Looking Upwards, pay starts at $15.75 an hour for jobs that can be physically taxing and emotionally draining; the Wendy’s down the street is offering $17 an hour for some positions.“We used to compete with hospitals and other health care entities, and now we’re competing with the convenience stores, the fast food places, the coffee shops,” Ms. Miranda said. “I’ve heard more and more people say, ‘I’d love to stay in this job, I’m passionate about the work, but I need to feed my family, I have to pay my rent.’”.css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-1kpebx{margin:0 auto;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-1kpebx{font-size:1.25rem;line-height:1.4375rem;}}.css-1gtxqqv{margin-bottom:0;}.css-1g3vlj0{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-1g3vlj0{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-1g3vlj0 strong{font-weight:600;}.css-1g3vlj0 em{font-style:italic;}.css-1g3vlj0{margin-bottom:0;margin-top:0.25rem;}.css-19zsuqr{display:block;margin-bottom:0.9375rem;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}When Steffy Molina graduated from college in 2017, she wanted a job where she could make a difference in the lives of people like her, an immigrant who spoke no English when she came to the United States at age 17. She moved to Providence, where she found a job with Family Service of Rhode Island, helping to arrange health care, nutrition support and other services for families with young children.Ms. Molina, now 27, found the work rewarding. But at $16 an hour, it was hard to make ends meet. Even after earning a master’s degree, she saw little path toward a livable wage.So Ms. Molina left Family Service shortly before the pandemic to take a better-paying job at a nonprofit that relied less on government contracts. And this year, she left nonprofit work to join a for-profit health care technology company, where she earns about $75,000 a year.Ms. Molina says she likes her new job, and still feels she is making a difference. But she misses being able to help families directly.“I loved the work, just the satisfaction of being able to work with a child or a family,” she said. “Even if they could have paid $18, I would have stayed.”Wage pressures aren’t hitting all nonprofits equally. Some organizations, mostly outside of social services, have endowments or other funding sources that make it easier for them to raise pay. And some states regularly adjust reimbursement rates to reflect prevailing wage levels or have used federal aid money to make ad hoc adjustments.Nonprofit employment has lagged in the recoveryChange since Feb. 2020 in employment among private-sector wage and salary workers

    Source: Current Population Survey via IPUMSBy The New York TimesBut government data suggests that the nonprofit sector as a whole is struggling to compete. Nonprofit organizations didn’t cut as many jobs as for-profit businesses early in the pandemic, but they have struggled to rehire: Total nonprofit employment in November was 4.8 percent below its prepandemic level, compared with a 1.5 percent employment gap in the for-profit sector, according to a New York Times analysis of Current Population Survey data. That is despite a sharp increase in demand for many nonprofit services during the pandemic.“We can’t just increase the cost of care,” said Micah Jorrisch, vice president at Maryhurst, a Kentucky nonprofit. “We aren’t Starbucks. We can’t add 50 cents to the cost of a cup of coffee.”At Maryhurst, which provides help to children suffering neglect and abuse, the staffing shortage was so severe that the board recently agreed to raise wages for frontline workers, in some cases by as much as 28 percent. But the organization didn’t receive any permanent increase in state funding to pay for those raises, meaning it will have to cut costs elsewhere or raise extra money from private donors.Neither approach is sustainable, Mr. Jorrisch said. And the organization still has a vacancy rate of about 30 percent — just this month, Maryhurst lost one of its longest-tenured supervisors to a job at Kroger, the supermarket chain.Many public-sector employers are facing similar problems. Billions of dollars of federal aid to state and local governments during the pandemic helped prevent the budget crises that some experts initially feared. But many local officials are wary of offering permanent wage increases based on short-term federal assistance.“It is very dangerous for us to set precedent using one-time funding to create larger salaries unless there is clarity that that funding will continue,” said John Malloy, superintendent of the San Ramon Valley Unified School District, east of Oakland, Calif.Mr. Malloy says his district has an unusually large number of vacant teaching positions. But as in many school districts, the larger challenge is outside the classroom, where they are competing more directly with rapidly rising private-sector wages. School bus drivers can earn far more making deliveries for Amazon. Cafeteria workers and custodians can make better money doing similar work at for-profit companies. This fall, Mr. Malloy resorted to asking central-office staff, including himself, to take shifts supervising students at lunchtime.Wages aren’t the only challenge. School superintendents say they are also battling burnout after close to two years of remote and hybrid learning, battles over mask and vaccine mandates, and other issues. And schools can’t offer remote work or flexible schedules to help compensate for lower pay.Similar issues face nonprofits, especially those involved in child welfare, mental health and other direct services. Demand for many services has soared during the pandemic, straining already thin staffs. Education and human services also disproportionately employ women, who have borne the brunt of the child care crisis that has emerged during the pandemic.Most economists expect the rapid wage growth among lower-paid workers to slow as the pandemic eases and more people return to the labor force. But even if the immediate staffing trouble abates, it could have long-term consequences. People who leave the field in search of better pay could be unlikely to return. And students won’t choose the field if they don’t believe they can earn a livable wage.“It’s a field that’s becoming unattractive,” said Beth Bixby, chief executive officer of Tides Family Services, a Rhode Island nonprofit.Ms. Bixby said one veteran employee, who works in a program for at-risk children, had recently told her that she was earning the same amount — $17 an hour — as her 17-year-old daughter, who works part time at a cosmetics retailer.“It’s demoralizing,” Ms. Bixby said. More

  • 138 Shares179 Views

    in Economy

    $15 minimum wage for federal contractors will take effect Jan. 30.

    by

    Employees of federal contractors will make at least $15 per hour under a final rule that the Labor Department announced Monday, providing a likely wage increase for over 300,000 workers, according to administration estimates.The wage floor will affect contracts that are executed or extended beginning on Jan. 30, 2022. The current minimum wage for contractors is $10.95 under a rule enacted by the Obama administration in 2014 and is scheduled to rise to $11.25 on Jan. 1. Both rules require that the minimum wage increase over time to account for inflation.Paul Light, an expert on the federal work force at New York University, has estimated that five million people work for employers that have federal contracts, including security guards, food workers, janitors and call center workers, but most already make more than $15 per hour. The rule will also apply to construction contracts entered into by the federal government.Labor Secretary Martin J. Walsh said in a statement that the rule “improves the economic security of these workers and their families, many of whom are women and people of color.”President Biden announced the rule in April when he signed an executive order directing the department to issue it. Mr. Biden’s announcement came amid a series of pro-labor moves by the administration, which included reversing Trump-era rules softening worker protections and enacting legislation that allocated tens of billions of dollars to strengthen union pension funds.Administration officials said they did not expect the minimum wage increase to result in significant job losses or cost increases, contending that the higher wage would improve productivity and reduce turnover, providing employers and the government with greater value.The federal minimum wage remains $7.25 per hour, though many cities and states have laws setting their wage floors substantially higher. The House of Representatives has passed a bill to raise the federal minimum to $15 per hour by 2025, but the legislation has not advanced in the Senate. More

  • 125 Shares99 Views

    in Economy

    Biden to Order a $15 Minimum Wage for Federal Contractors

    by

    President Biden plans to sign an executive order on Tuesday raising the minimum wage paid by federal contractors to $15 an hour, the latest in a set of ambitious pro-labor moves at the outset of his administration.The new minimum is expected to take effect next year and is likely to affect hundreds of thousands of workers, according to a White House document. The current minimum is $10.95 under an order that President Barack Obama signed in 2014. Like that order, the new one will require that the new minimum wage rise with inflation.White House economists believed the increase would not lead to significant job losses, a finding in line with recent research on the minimum wage, and that it was unlikely to cost taxpayers more money, two administration officials said in a call with reporters. They argued that the higher wage would lead to greater productivity and lower turnover.The White House also contends that although the number of workers directly affected by the increase is relatively small as a share of the economy, the executive order will indirectly raise wages beyond federal contractors by forcing other employers to bid up pay as they compete for workers.Several cities have a minimum wage of at least $15 an hour, and several states have laws that will raise their minimum wage to at least that level in the coming years. There is so far little evidence on how a $15 minimum wage affects employment in lower-cost areas of such states.Two years ago, the House of Representatives passed a bill to raise the federal minimum wage to $15 an hour by 2025, but the legislation has faced long odds in the Senate. Mr. Biden sought to incorporate such a measure in his $1.9 trillion pandemic relief package so that it could pass on a simple majority vote, but the Senate parliamentarian ruled that it could not be included.Mr. Biden’s executive order will also eliminate the so-called tipped minimum wage for federal contractors, which currently allows employers to pay tipped workers $7.65 an hour as long as their tips put them over the regular minimum wage. Under the new minimum, all workers must be paid at least $15 an hour.The order will technically begin a rule-making process that is expected to conclude by early next year. The wage will be incorporated into new contracts and existing contracts as they are extended. More