President Joe Biden’s administration says the new minimum wage for federal contractors could lead to hundreds of thousands of workers getting bigger paychecks starting next year.
The Labor Department said Monday it has finalized a regulation that sets a $15 wage floor for workers under federal contracts. Firms that provide services to the US government must pay workers at least that much under contracts that are in force or renewed from January 30, 2022.
The federal government already sets contractor minimums. through the prevailing wage law, But Jessica Luman, the acting administrator of the Labor Department’s Wage and Hour Division, said on a press call Monday that there are 327,000 workers under federal contracts who are currently entitled to less than $15 an hour.
Officials expect many of those workers to get paid as a result of the new rule. Luman said restaurant workers, child care workers and maintenance workers are the most likely to see pay increases.
“The bottom line is that we really want to make sure that we are taking advantage of the purchasing power of the federal government to ensure fair wages for workers across the country,” Luman said.
Biden was signed an executive order Instructed the Labor Department to develop the rules back in April.
This rule covers not only workers working on federal properties but also anyone working under a service or construction contract with the government. This applies to all US territories and states, many of which have local minimum wages of less than $15 an hour. Luman said workers in those areas are likely to see the most impact from the rule.
After the initial rise to $15, the wage rate would be linked to the inflation index so that it would rise with the cost of living, which required firms to adjust their minimums each year. The rule would also eliminate the required minimum wage by 2024, which would require firms to pay the full minimum wage at restaurants and other businesses under federal contracts, not counting gratuities.
“The bottom line is that we really want to make sure that we are taking advantage of the purchasing power of the federal government to ensure fair wages for workers across the country.”
This rule would have no direct impact on the vast majority of workers whose jobs are not tied to federal contracts. However, Labor Secretary Marty Walsh said on Monday that the administration hopes the rule will encourage higher wages in competitive occupations.
“It’s a step in the right direction,” Walsh said. “It also ensures that the federal government leads by example when it comes to creating good jobs for workers across the country.”
Using the procurement process to influence working conditions in private companies is nothing new. Presidents going back to Franklin Delano Roosevelt have used federal contract rules to address discrimination and other workplace issues. Such rules have little effect compared to an act of Congress that applies to the entire private sector, but proponents say they allow presidents to unilaterally raise standards for at least some workers. .
The New Minimum Wage Rule Is Essentially an Update first rule Issued by the administration of Barack Obama, which set a minimum of $10.10 an hour under federal contracts starting in 2015. Due to inflation adjustments, that minimum now sits at $10.95, meaning Biden’s change to $15 would be a large and sudden increase.
House Democrats have passed a bill that would impose a $15 federal minimum wage, but Democrats in the Senate have not managed to get all their allies on board and face universal opposition from Republicans. The federal minimum is still $7.25 an hour and hasn’t been raised in over a decade.
The federal government doesn’t keep great data on the salaries of federal contractors, so it’s hard to know exactly how many workers will see a pay increase. Earlier this year, the Economic Policy Institute estimated that a $15 increase would lead to a direct increase in Maximum 390,000 employees, a potentially larger number than the Labor Department estimates. EPI said the average wage increase would be around $3,100 annually.
The rule would result in employers paying higher wages, but they could add those costs to their bids on contracts so that the government would end the bill instead of private companies.
Walsh argued that raising wages for the lowest-paid contractors would ensure that work done for the government would be “done better and faster.”