Economy

A Minimum Wage Raise for Federal Contractors Won't Change That Much


In his State of the Union address, President Obama said he wasn’t going to wait for Congress to raise the federal minimum wage and promised to issue an executive order requiring government contractors pay their workers at least $10.10 an hour. “If you cook our troops’ meals or wash their dishes, you should not have to live in poverty,” the president said last night. Before the applause could barely die down, he went on to acknowledge tacitly that his own actions were limited in scope: “Of course to reach millions more,” Obama added, “Congress does need to get on board.”

So just how many workers will his executive order effect? Nailing that down isn’t possible, because the government doesn’t collect data on federal contract workers. The White House says it includes “military base workers who wash dishes, serve food, and do laundry” as well as janitors and construction workers. Valerie Jarrett, a senior adviser to Obama, told Bloomberg TV yesterday that “a couple hundred thousand” workers could benefit. Amy Traub, a senior policy analyst at the progressive think tank Demos, similarly estimates it could be “a few hundred thousand.”

But that figure sounds “extraordinarily high” to Kevin Brancato, a senior defense analyst with Bloomberg Government, because most workers employed by government contractors already earn more. Service and construction contracts are governed by two specific laws—the Service Contracting Act and the Davis-Bacon Act—that require the government to pay at least the prevailing wages in any given area. Near Washington, D.C., for instance, an area home to many government contractors, the only job categories with official prevailing hourly wages below $10.10 are related to laundry ($9.88) and waitressing ($9.70). Brancato says the two laws also require contractors to honor existing union contracts. “You better believe the union level is higher” than the prevailing wage,” he says.

At the same time, Brancato is dubious of House Speaker John Boehner’s estimate that “close to zero” people will benefit. The impact of the executive order will be greatest in the middle of the country, where prevailing wages are lower. In the Kentucky county where the Army’s Fort Campbell is located, for example, the going rate for many more jobs fall below $10.10, including couriers ($9.22), janitors ($9.95), and cashiers ($7.88). Near the Fort Hood military base in Texas, the prevailing wages for food service workers ($8.27), dishwashers ($7.36), and landscaping pruners ($9.19) are all below the $10.10 threshold.

There are some exclusions to the executive order. It doesn’t include procurement contracts for such things as Army uniforms, whose manufacturers aren’t required to pay prevailing wages. It’s not clear whether concession agreements to operate at federal sites are included; concessionaires aren’t required to pay the prevailing wage, either, which has led to situations such as the strikes last year by workers at McDonald’s outlets inside Smithsonian museums over hourly wages just above the city’s minimum of $8.25.

If concessions are covered under the executive order, that could give a big boost to the number of workers who may see a meaningful raise. Traub says that Demos has heard from the White House that concession agreements would be included, but there’s no mention of them in the White House fact sheet for reporters. The White House hasn’t yet responded to a request to clarify this point.

Regardless, the executive order doesn’t mean that thousands of people will immediately get a raise. The White House says the new minimum wage will be a requirement on future contracts and won’t retroactively effect existing agreements. Some contracts could be due next week, but others may not be renewed for year. For proponents of a higher minimum wage, such as Traub, who said she’s “celebrating” the order, that’s still better than nothing. “People should get a raise right away,” she said, “but it will take time.”

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Weise is a reporter for Bloomberg Businessweek in New York. Follow her on Twitter @kyweise.

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