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Obama Announces Minimum Wage Hike To $10.10 for Federal Contractors' Workers

Monday, February 3, 2014

By Ben Penn
Jeff Kinney contributed to this report.
 

Jan. 28 --President Barack Obama will sign an executive order guaranteeing workers employed through new federal contracts receive at least $10.10 per hour, the president said during his State of the Union address Jan 28.

He said he will issue the order “in the coming weeks” because “if you cook our troops' meals or wash their dishes, you should not have to live in poverty.”

While the president will continue to urge Congress to pass legislation that boosts the federal minimum wage to $10.10 for all workers, the executive action is seen as a swifter approach that could impact several hundred thousand individuals, including workers in fast food, construction and janitorial services.

“A higher minimum wage for federal contract workers will provide good value for the federal government and hence good value for the taxpayer,” the White House said in a Jan. 28 fact sheet. “Boosting wages will lower turnover and increase morale, and will lead to higher productivity overall.”

The order will apply only to new contracts signed after its effective date “so contractors will have time to prepare and price their bids accordingly,” the fact sheet said. Covered workers include those currently paid less than $10.10 per hour employed as janitors and construction workers, as well as those “performing services” such as military base workers washing dishes, serving food and doing laundry.

Rep. Raul Grijalva (D-Ariz.), co-chair of the Congressional Progressive Caucus, told Bloomberg BNA Jan. 28 that the president's action will impact some 200,000-300,000 workers, but potentially up to 1 million as new contracts are continually issued.

The CPC had called on Obama to raise wages for federal contractors' employees in three separate letters to the president since last July, but did not hear a confirmation that he would act on their request until late Jan. 27, Grijalva said.

Concern From Contractors

The Professional Services Council, an industry group representing government contractors in the services sector, took issue with the executive order.

“There is natural concern that, amid a national debate over the minimum wage, government contractors are being uniquely singled out,” Stan Soloway, PSC's president and CEO, said in a Jan. 28 statement.

The Service Contract Act, enforced by the Labor Department, already requires federal contractors to pay wages that are “overwhelmingly” greater than $10.10 per hour, according to Soloway.

The SCA, which applies to service contracts with the U.S. or the District of Columbia that are worth at least $2,500, requires contractors and subcontractors to provide their service employees with at least the monetary wage rates and the level of fringe benefits that prevail in the locality, or the rates contained in a predecessor contractor's collective bargaining agreement.

Alan Chvotkin, the PSC's executive vice president and counsel, told Bloomberg BNA Jan. 28, “We believe our members pay fair wages, but we recognize it's important that every worker get a fair wage.”

He said the existing mechanisms to set prevailing wages contained in the Davis-Bacon Act--covering construction workers on federally funded projects--already work and are “administratively easy by comparison” to an executive order. “They could do it the easy way, or they could make it hard and cover more contracts and types of work, which would add to the dichotomy between the federal marketplace and the commercial marketplace,” Chvotkin said.

Application to Subcontractors

The full scope of the executive order, including exactly which workers it will apply to and whether it will be extended to subcontractors, awaits more information from the Obama administration.

Speaking at a press conference Jan. 28, House Speaker John Boehner (R-Ohio) said he suspects the president has the authority to sign an executive order setting wages for federally contracted employees, but that “House Republicans will continue to look closely at whether the president is faithfully executing the laws.” He went on to estimate that because the order only applies to future contracts, the number of workers it will actually help “is somewhere close to zero.”

Joseph Geevarghese, deputy director at the labor federation Change to Win, acknowledged that because of the complexity of federal contracting, “there's not a one-size-fits-all policy” that could apply to all workers at federal buildings earning less than $10.10 per hour.

“The federal government does business through a variety of different financial mechanisms--contracts, loans, grants, leases, concessions--and I think they will probably try to figure out how to best apply the principles in each particular instance,” he said.

The White House did not respond when asked Jan. 28 whether the minimum wage increase would be extended to subcontractors.

Minimum Wage Battle Remains

The White House fact sheet emphasized that Obama is “calling on Congress to finish the job for all workers by passing the Harkin-Miller bill.”

Legislation known as the Fair Minimum Wage Act (H.R. 1010, S. 1737), introduced by Rep. George Miller (D-Calif.) and Sen. Tom Harkin (D-Iowa) in the House and Senate, respectively, would increase the federal minimum wage from $7.25 per hour to $10.10 in three steps over several years and index it to inflation thereafter (31 HRR 234, 3/11/13).

The measure, which would also raise the minimum pay for tipped employees, could receive Senate consideration in early March, but faces an unclear future in the Republican-controlled House.

“I'm hopeful the president's leadership will inspire congressional leaders to follow suit by taking action to raise wages for millions of Americans relying on low-wage jobs to make ends meet,” Christine Owens, executive director of the National Employment Law Project, said in a Jan. 28 statement.

 

To contact the reporter on this story: Ben Penn in Washington at bpenn@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

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