Executive Order to Raise Minimum Wage Paid by Federal Contractors

by Dave Schuler on January 28, 2014

There’s a considerable amount of huffing and puffing about the President Obama’s requiring federal contractors to pay a higher minimum wage to their employees:

President Obama will announce in the State of the Union address Tuesday that he will use his executive power to increase the minimum wage to $10.10 per hour for workers on new government contracts, fulfilling a top demand by liberal lawmakers and groups, according to a White House document.

Obama will also renew his call for Congress to pass legislation to raise the federal minimum wage for all workers from $7.25 per hour to $10.10 per hour by 2015. But the president is taking the executive action with no clear timeline for Congress acting on the broader legislation. Previously, the White House said it wanted to concentrate on the legislative route for boosting the minimum wage.

What’s not being said is that the announcement may be largely or even completely symbolic. It won’t take effect until after 2015 when new contracts kick in. Just as importantly, no one knows how many workers will be affected. There’s apparently a study out there that says that 75% of the employees of certain federal contractors, “contractors who manufacture military uniforms, provide food and janitorial services, and truck goods”, are paid under $10 an hour. Sadly, the report seems to be unreachable. Based on the reported accounts there’s no reckoning of how much below $10 an hour is being paid (if there were, I would think the news accounts would report it) and the news reports fail to mention actual numbers of people. In any event I would think the additional labor cost will simply be passed on to the federal government’s general fund. There’s probably a limit to how much those contractors can utilize capital investment to offset the increased cost of labor.

There also appears to be no mention of how the order will be enforced.

{ 14 comments… read them below or add one }

PD Shaw January 28, 2014 at 3:01 pm

I was curious about this in respect to prevailing wage. Will this policy discourage contracting work in law wage areas in the country, such as the rural South?

Might be the report:

http://www.demos.org/sites/default/files/publications/UnderwritingBadJobs-Final-2.pdf

... January 28, 2014 at 3:08 pm

There’s probably a limit to how much those contractors can utilize capital investment to offset the increased cost of labor.

Certainly not in the time frame mentioned.

Will this policy discourage contracting work in law wage areas in the country, such as the rural South?

I’m sure that the one thing the White House has looked at is whether or not this will hurt their political enemies. That seems to be the only thing they do well, as evidenced by the IRS scandal, etc.

TastyBits January 28, 2014 at 3:19 pm

Subcontract the work or split the company.

PD Shaw January 28, 2014 at 3:24 pm

I don’t think I linked to the correct report. Too much about $12 an hour and mean wages.

Dave Schuler January 28, 2014 at 3:34 pm

Subcontract the work or split the company.

Yeah, I’d meant to work that into the body of the post. That’s why I don’t think that an executive order will be enforceable.

PD Shaw January 28, 2014 at 3:59 pm

GW LawProf Dan Gordon suggests the executive order might violate the Federal Property and Administrative Services Act of 1949, which calls for measures which ensure “economy and efficiency” in procurement. He’s uncertain whether there would be interest in challenging the decision. (I would imagine in certain types of cost plus contracts this might be a welcome development.)

... January 28, 2014 at 4:03 pm

TB, thanks for the heads-up on the chain-as-a-collar bit. I honestly didn’t think my neighbor, bad as he is, was training a dog for fighting purposes. But after looking it up, that sure appears to be the case.

Looking that up has been rather horrific, I have to say.

PD Shaw January 28, 2014 at 4:05 pm

Local police beat this week reported a break-in, where they stole a 50 inch t.v., an X-Box, and a six-week old pit bull. I thought of you, though I don’t know what it all means.

... January 28, 2014 at 4:11 pm

It means there’s a market for pit bull puppies. After the pictures I was just looking at …. I honestly didn’t think it was possible for my opinion of my neighbor to get any worse, short of finding it he is a pedophile, but I was wrong.

Dave Schuler January 28, 2014 at 4:22 pm

He’s uncertain whether there would be interest in challenging the decision.

Also, I wonder who would have standing to challenge it in court. Given several recent court decisions, not the Congress.

It would have to be a federal contractor and the contractor would need to show that they’d been injured by the order. Suing one’s customers is always chancy. And, if the new contract were to take into account the higher wages the contractor needed to pay, there’d be no injury. I don’t think that taxpayers have ever prevailed in something like this.

The only real recourse would be via the Congress.

TastyBits January 28, 2014 at 4:24 pm

He is probably just a wanna be, and he is training the dog to terrorize the neighbors. I doubt anybody involved in dog fighting would let the dog run loose. Why bring animal control to ask a lot of questions.

On the other hand, animal control may be interested anyway.

... January 28, 2014 at 4:30 pm

TB, maybe a wannabe, but he was raising a nicely aggressive dog.

So, if I am understanding this particular Presidency correctly, the President can do anything he want as long as Congress is divided. I don’t think a single party being in control would stand for this abuse of prerogatives.

This really bodes poorly for the future.

Piercello January 28, 2014 at 5:56 pm

Dave, I haven’t researched it, but I’ve seen some claims that union wages are the beneficiary here because they are indexed to the minimum wage. Might be worth following up if you are interested.

Dave Schuler January 28, 2014 at 7:25 pm

Dave, I haven’t researched it, but I’ve seen some claims that union wages are the beneficiary here

That’s something I’ve written on in the past. Some union contracts are “minimum wage multiple” contracts. It’s a hard subject to research because the contracts aren’t generally online.

I’m not sure that would apply here but it does bring up a good point: what effect would wages raised by executive order have on minimum wage multiple contracts? I don’t think it would have any.

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