Obama Issues Order Boosting Minimum Wage for Contractors

President Obama issued an executive order Wednesday raising the minimum wage for workers under federal contracts to $10.10 per hour, starting next year.

The move fulfills a pledge Obama made in his State of the Union address last month to take action on his own to raise wages for lower-paid workers on federal projects and at government facilities.

“There are hundreds of thousands of people working under contracts with the federal government to provide services or construction who are currently making less than $10.10 an hour,” the White House said in a statement. “Some examples of the hardworking people who would see their wages go up under this executive order include nursing assistants providing care to our veterans at nursing homes, concessions workers in national parks, people serving food to our troops, and individuals with disabilities working to maintain the grounds on military bases.”

Before signing the order at the White House, Obama said, "right now, there’s a dishwasher at Randolph Air Force Base in Texas making $7.76 an hour -- $7.76 an hour. There’s a fast-food worker at Andrews [Air Force Base], right down the street, making $8.91 an hour.  There’s a laundry worker at Camp Dodge in Iowa making $9.03 an hour.  Once I sign this order, starting next year, as their contracts come up, each of them and many of their fellow coworkers are going to get a raise."

Obama has asked Congress to increase the minimum wage for all workers from $7.25 per hour to $10.10. As yet, lawmakers have not acted to do so.

The contractor wage hike will not take effect until Jan. 1, 2015, and will cover only workers under new contracts issued after that date.

Obama’s order also changes the wage structure for federal contract workers whose compensation depends heavily on tips. The order would require that such workers receive a total of $10.10 per hour, through a combination of tips and an employer contribution. While companies now must pay tipped workers $2.13 per hour (and then make up the difference if that and the employees’ tips don’t add up to minimum wage), the executive order requires that employers pay a minimum base wage of $4.90. That amount increases by 95 cents per year until it reaches 70 percent of the regular minimum wage. If a worker’s tips do not add up to at least $10.10, the employer must make up the difference. 

“Boosting wages will lower turnover and absenteeism, and increase morale and productivity overall,” the White House statement said.

Even before he signed the order, Obama’s move drew criticism from the Professional Services Council, a contractors’ trade group. “Federal contractors providing services of the type the president’s order will cover already pay a wage dictated by the Department of Labor under the Service Contract Act,” said the group’s president and CEO Stan Soloway in a statement on the day Obama issued his State of the Union message.

American Federation of Government Employees President J. David Cox has praised Obama’s order, but said he also should back legislation granting wage hikes to lower-paid federal employees.