Updating an Obama-era measure, Biden’s order mandates that all federal agencies incorporate what amounts to a $4.05 minimum wage hike into new contract solicitations by January 2022 and into new contracts by March 2022, the White House announced Tuesday. The minimum hourly rate will then rise annually to keep up with inflation.
“It will improve the economic security of families and make progress toward reversing decades of income inequality,” the White House said in a fact sheet.
The order will likely face opposition in the business community, which has argued that forcing companies to pay at least $15 will stifle job growth in an economy still recovering from the pandemic. Large corporations that do business with the government also have resisted procurement executive orders with labor mandates in the past by taking the administration to court.
The executive order fulfills the president’s first-week commitment to mandate by his 100th day in office a $15 federal contractor minimum wage, which the White House estimates will apply to “hundreds of thousands” of workers. That would amount to a marginal gain relative to the administration’s failed bid to more than double the economy-wide hourly minimum to $15 as part of a pandemic stimulus package enacted in March.
Tuesday’s wage requirements also mark the first in what the Biden administration has vowed will be multiple presidential actions that use executive authority to improve workplace conditions in policy areas that face steep hurdles in Congress. That includes commitments to steer contracts to firms that provide quality benefits and don’t thwart union organizing drives.
The U.S. Labor Department and the White House Federal Acquisition Regulatory Council will now implement Biden’s directive in new regulations.
Many businesses that regularly receive contracts from federal agencies, such as construction companies, already pay more than $15 an hour. But the minimum wage increase would more likely affect employees performing other services for agencies, such as cleaning and cooking at federal buildings or staffing call centers to support government initiatives.
The $15 minimum wage will apply not just to agencies that are awarding new and renewed contracts, but also will be applied to existing contracts when those companies undergo an annual review process with the agency, said a senior administration official on a call with reporters.
Biden’s action gradually eliminates over three years the lower minimum wage of $7.65 for federal contractor employees who rely on tips. By 2024, workers regularly earning gratuities will be subject to the same $15 floor pay as other contractor employees, the order will state. It will also ensure government contractors pay workers with disabilities at least $15 per hour.