President Joe Biden on Tuesday signed an executive order requiring federal contractors to pay a $15 minimum wage to all workers on federal contracts, impacting hundreds of thousands of workers nationwide, according to the White House.
“These workers are critical to the functioning of the federal government: from cleaning professionals and maintenance workers who ensure federal employees have safe and clean places to work, to nursing assistants who care for the nation’s veterans, to cafeteria and other food service workers who ensure military members have healthy and nutritious food to eat, to laborers who build and repair federal infrastructure,” the White House said in a statement.
President Biden signed an order in January to begin this process of raising the wage, directing the government to "start the work that would allow him to issue" this action within his first 100 days.
The current minimum wage for federal contracts is $10.95 per hour, and $7.65 per hour for tipped minimum wage.
The order will mandate that by Jan. 30, 2022, all agencies will be required to incorporate a $15 minimum wage in new contract solicitations, and by March, all agencies will need to implement that wage in new contracts — they will also be required to implement the wage increase when exercising an option to extend contracts.
Biden’s action also includes an elimination of the tipped minimum wage for federal contractors — allowing employers to pay them sub-minimum wage as long as their tips bring them up to the amount — by 2024, extends the $15 wage to federal contract workers with disabilities, and revokes a Trump-era executive order about minimum wage exemptions for outfitters and guides operating on federal lands.
According to the White House, the order will enhance worker productivity by boosting morale, effort and health, reduce turnover, thereby reducing costs for onboarding, reduce absenteeism and slash supervisory costs.
Citing a Harvard study which found that raising wages by $1 led to a return of $1.50 via reduced costs and increased productivity, the administration says that “as a result of raising the minimum wage, the federal government’s work will be done better and faster.”
The White House also touts that this order “ensures that hundreds of thousands of workers no longer have to work full time and still live in poverty,” providing economic security to families, make strides towards narrowing racial and gender disparities in income, and help boost local economies.
The administration also cited a study which said that that competitors in similar markets may try to raise their minimum wage to $15 as a result in an attempt to recruit and retain talent.
A report from Organization for Economic Cooperation and Development published earlier this month backed Biden’s plan to increase the minimum wage, saying that the COVID-19 pandemic “brought the issue of minimum wages to the fore, as a means to ensuring decent incomes of the low income workers.”
“This is particularly the case in the United States, where raising the federal minimum wage is among the top priorities,” the international organization continued. “Recent evidence suggests that increases of the minimum wage up to 59% of the median wage have little negative impact on employment.”
“Raising the federal minimum wage would both incentivize participation and help to ameliorate earnings inequalities,” the organization added.
The move comes as the battle to raise the federal minimum wage continues, a major progressive priority backed by the Biden Administration.
The federal minimum wage has been $7.25 per hour since 2009, the longest period Congress has gone without adjusting the minimum wage since its creation in 1938.
A high-profile battle to raise the wage as part of the president’s COVID-19 $1.9 trillion relief bill was dashed in Feb. when the Senate’s parliamentarian ruled it could not be included in the relief bill.
Biden and other Democratic leaders called that decision a disappointment and pledged to continue the fight to raise the wage.
Recent polling suggests that a majority of Americans support raising the minimum wage. A Yahoo! Finance-Harris poll from Feb. showed that 83% of Americans believe the current minimum wage of $7.25 is not enough, and a Reuters-Ipsos poll from the same month showed that 59% of respondents support the idea of raising the minimum wage to $15 by 2025.
A study from the non-partisan Congressional Budget Office found that increasing the minimum wage to $15 an hour by 2025 would cost the US 1.4 million jobs by 2025, but also increase wages for 17 million Americans directly and lift 900,000 Americans out of poverty.