President Joe Biden signed an executive order Tuesday that raises the minimum wage for federal contractors and tipped employees working on government contracts to $15 an hour.
The raise from $10.95 an hour will begin in January, and agencies must implement the measure no later than March. Biden has signed a separate order to raise the minimum wage to $15 an hour for federal employees.
The new order also directs federal agencies to raise the tipped minimum hourly wage to $15 by 2024 and to ensure that tipped employees working on federal contracts earn the same minimum wage as other employees on federal contracts.
The new order raises the minimum wage to the same level for federal contract workers with disabilities, and it includes a cost-of-living increase every year beginning in 2022.
The increase builds on a 2015 executive order signed by President Barack Obama that raised the minimum wage for federal contractors, including tipped workers and workers with disabilities, to its current level. Biden has made raising the national minimum hourly wage, which has been stuck at $7.25 since 2009, a priority.
Organized labor and its supporters have been pushing for nearly a decade for a $15-an-hour national minimum wage that would apply to millions of American workers, but shifting political winds and the lack of consensus in Congress have made that a challenge. The administration and Senate Democrats retreated on their efforts to include a $15 minimum wage in Biden's $1.9 trillion Covid-19 relief bill.
A study released by the nonpartisan Congressional Budget Office in February found that raising the federal minimum wage to $15 an hour would bring nearly 1 million people out of poverty over the next four years, but it also found that it would result in the loss of 1.4 million jobs, raise the cumulative budget deficit by $54 billion from 2021 to 2023 and result in higher prices for goods and services.
A senior Biden administration official could not give an exact number of federal contractors who would benefit, predicting "hundreds of thousands," and noted that the number of workers would be small compared to increasing the federal minimum wage or a state's minimum wage. The number is "something that's not static, because federal contracts are not static, and it will take time to phase it in into new contracts," the official said.
"These workers are critical to the functioning of the federal government, from cleaning professionals and maintenance workers ... 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 official said.
The Biden administration official said increasing salaries would not add costs to the government or taxpayers because it would allow "employers to retain top talent and lower costs associated with recruitment, and training sites have been found to reduce absenteeism, lead to higher productivity and reduce supervisory costs."
The official said that to implement the order, the Labor Department and the Federal Acquisition Regulatory Council would both have to issue rules to agencies. Once they are developed, they will be applied to new contracts, as well as contracts up for renewal, which will be reviewed and revised to include the new minimum wage.