President Joe Biden’s administration says hundreds of thousands of workers could see bigger paychecks starting next year due to its new minimum wage for federal contractors.
Monday’s Labor Department announcement stated that it has finalized regulations that set a minimum $15 per hour wage for federal contract workers. Under contracts that are renewed or implemented beginning Jan. 30, 2022, firms providing services for the U.S. government must pay their workers at least $15 an hour.
Minimums for contractors are already set by the federal government through prevailing wage law. But Jessica Looman, acting administrator for 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 per hour.
The new regulations are expected to result in many workers getting raises. Looman stated that restaurant employees, child care workers, and maintenance workers will be the most likely recipients of pay increases.
“The bottom line is we really want to make sure we are leveraging the purchasing power of the federal government to ensure fair wages for workers across the country,” Looman said.
Biden had signed an executive orderDirecting the Labor Department back to April in the development of the regulation.
It applies not only to federal workers, but also anyone employed under service- or construction contracts. The rule is applicable in all U.S. states and territories, with many having minimum wage levels well below $15 an hour. Looman indicated that those workers will see the biggest impact of this rule.
The wage rate will increase with inflation, so firms must adjust their minimums every year after the $15 initial raise. This rule will eliminate tipping by 2024 and require firms to pay full wages for restaurants, other federally contracted businesses, as well as gratuities.
“The bottom line is we really want to make sure we are leveraging the purchasing power of the federal government to ensure fair wages for workers across the country.”
It will not have any direct impact on most workers, whose jobs do not depend on federal contracts. Marty Walsh, Labor Secretary, said Monday that his administration hopes to encourage greater wages in competing companies.
“It’s a step in the right direction,” Walsh said. “It also ensures that the federal government leads by example when we talk about creating good jobs for workers all across this country.”
It is not new to use the procurement process in order to improve working conditions for private businesses. Since Franklin Delano Roosevelt, presidents have made use of federal procurement rules to deal with discrimination in the workplace. These rules are less powerful than an Act of Congress which applies to all private sectors, however proponents claim they give presidents the ability to unilaterally raise standards for some workers.
The updated minimum wage law is the result of an actual update. earlier rule issued by Barack Obama’s administration, which set $10.10 per hour as a minimum under federal contracts starting in 2015. Due to inflation adjustments, that minimum now sits at $10.95, meaning Biden’s change to $15 will amount to a large and sudden raise.
House Democrats have passed a bill that would enact a federal minimum wage of $15, but Democrats in the Senate haven’t managed to bring all of their colleagues on board and face universal opposition from Republicans. The federal minimum is still $7.25 per hour and hasn’t been raised in more than a decade.
The federal government does not keep great data on the pay of federal contractors, so it’s hard to know exactly how many workers will see a wage increase. The Economic Policy Institute had earlier this year estimated that an increase to $15 would result in direct increases. up to 390,000 workersThe Labor Department estimates that this number could be higher than it actually is. EPI predicted that an average annual pay rise of around $3,100 would occur.
The rule will force employers to pay more wages, but may include those costs in their bids for contracts. This could mean that the government pays the entire bill instead of private businesses.
Walsh argued that raising wages for the lowest-paid contractors will ensure that work performed for the government “will be done better and faster.”