Raising the minimum wage for contract workers now…who’s next?

By Linda H. Evans,
Senior Associate.


As expected, in the President’s State of the Union address on Tuesday night, he announced that he is raising the minimum wage for workers under federal contracts to $10.10 per hour.


The new policy, which will be instituted by executive order, may affect hundreds of thousands of workers whose jobs are supported by federal dollars. The executive order will cover “workers who are performing services or constructing buildings and getting paid less than $10.10 per hours.” Those likely to see increases include dishwashers, food servers, and construction workers, many of whom are working for private employers, but in government buildings. The raises will take effect only for “new contracts after the effective date of the order.” Existing contracts will not be impacted, but it does give notice to contractors to adjust future bids, likely by raising them.


The proposal does raise some concerns about its implications, which is that federal contractors are paying substandard wages and are being singled out for doing so. In fact, contractor wages are dictated by the Department of Labor under the Service Contract Act, and overwhelmingly exceed those required by the new proposal.


The increase in minimum wages for contract workers is no doubt designed in part to put more pressure on Congress to pass legislation to raise the minimum wage for all workers. During his speech, President Obama called on Congress to enact legislation to raise the overall federal minimum wage from the current $7.25 to $10.10 per hour and peg it to inflation. That bill would also increase the minimum wage for tipped workers, which has not changed in 20 years.


It is not clear when this increase will become effective…stay tuned!