Bloomberg News

Obama Signs Minimum Wage Order on U.S. Contract Workers

February 12, 2014

President Barack Obama signed an executive order raising the minimum wage to $10.10 an hour for U.S. government contract workers in the future, fulfilling a promise from his State of the Union address.

The order applies to U.S. contractors such as National Park Service concessions workers and military food-service employees, according to a White House fact sheet. The 39 percent increase from $7.25 an hour takes effect for new contracts starting Jan. 1, 2015.

Obama is making the change without action from Congress, an approach he vowed to follow during his Jan. 28 State of the Union speech outlining his vision for reducing income inequality. At a White House signing ceremony today, he again urged lawmakers in Congress to raise the minimum wage for all U.S. workers to $10.10, saying it’s good for workers as well as for the economy.

'The Defining Challenge of Our Time'

“While Congress decides what it’s going to do, I’m going to do what I can to help raise working Americans’ wages,” he said. “It makes a big difference for a lot of families.”

Labor Secretary Tom Perez said at a news briefing today that the higher wage would eventually apply to “hundreds of thousands” of workers. He said a more precise estimate won’t be made for several months until the regulations are finished.

Republicans Opposed

Lawmakers didn’t act on Obama’s plea in last year’s State of the Union to raise the wage nationwide. And Republicans including House Speaker John Boehner of Ohio have faulted Obama’s move to raise it for the federal contract employees as costing jobs while helping few workers.

The president wants Congress to pass a measure sponsored by Senator Tom Harkin of Iowa and Representative George Miller of California, both Democrats, that would index the U.S. minimum wage to inflation after raising it to $10.10 an hour. The U.S. minimum wage now is $7.25 an hour, where it has been since 2009.

The increase ordered by Obama will only kick in when new contracts are signed, and it won’t cover existing employees until their contracts are renewed, according to a White House statement.

“We don’t expect the impact of this to be all that significant,” said Stan Soloway, chief executive officer of the Professional Services Council, an Arlington, Virginia-based group that represents contractors such as CACI International Inc. and a unit of Sodexo. (SW) Sodexo, based in Issy-les-Moulineaux, France, provides food and other services to the U.S. government.

Workers Covered

The wages for the “vast preponderance” of work covered by the order are set by another federal law, Soloway said in a phone interview last month. Most employees who would be affected are already being paid more than the order requires, Soloway said.

While the unemployment rate fell to 6.6 percent in January, the least since October 2008, the U.S. still hasn’t replaced all the jobs lost in the recession. Only 63 percent of working-age Americans are employed or actively seeking work, near the lowest level since February 1978, while real median household income of $51,000 is 8 percent lower than in 2007.

Public Support

Polls show public support for raising the $7.25-cent federal minimum wage, and Democrats are making Republicans’ opposition a part of their income-inequality campaign theme. A Jan. 8 poll by Hamden, Connecticut-based Quinnipiac University found 71 percent of Americans, including 52 percent of Republicans, favor raising the minimum wage.

Business groups have criticized the Harkin-Miller proposal.

“The bill the Senate is going to move to in the coming weeks is largely a political exercise designed to drive the notion that Senate Democrats care about low-wage workers,” said David French, senior vice president of government relations at the National Retail Federation, whose members include Wal-Mart Stores Inc.

The Obama administration has support for raising the minimum wage from some companies, including Costco Wholesale Corp. (COST:US), according to the White House fact sheet.

Federal-contract workers who have been pushing for a minimum-wage increase as part of the Good Jobs Nation campaign stood with Obama today when he signs the order, Laura Brandon, a spokeswoman for the campaign said in an e-mail.

To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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