Federal Contractors to See Potential Wage Increase

Minimum wage has been a hot topic over the last year, and continues to be so into 2014. The Fair Minimum Wage Act now sits in front of both the House of Representatives and the Senate. The Act aims to raise the federal minimum wage from $7.25 per hour to $10.10 per hour in three stages over the next several years. The Act would further raise the minimum wage for tipped employees and ensure that, in future years, the minimum wage would adjust annually for inflation, as it does in many states.

While the majority of American minimum wage employees will have to wait for the bill to pass, another group of employees in the United States may see pay increases sooner. In his State of the Union address, President Obama announced his plan to sign an executive order, which will raise the minimum wage for federal contract employees to $10.10 per hour. Because federal contracts can be so complex, the new wage requirement will not affect anyone who is currently under contract, but will affect all of those who sign new future contracts or renewed contracts.

The President stated the order could be expected in a few weeks, and the White House claimed it believes that “[b]oosting wages will lower turnover and increase morale, and will lead to higher productivity overall.” Many lower wage-earning federal contract employees work on military bases as dishwashers, janitors, food servers, and launderers. Obama specifically voiced his belief that the people who help take care of United States troops should not have to live below the poverty level.

Opposition for the Wage Hike

Of course, people quickly spoke up against the President’s plan, citing concerns or simply downplaying the bill. First, some industry groups took the order as a slight against federal contractors, stating the President singled out contractors for the increase, which may insinuate that contractors do not already pay a fair wage.

Industry groups cited the Service Contract Act, which already requires employees under certain types of contracts to be paid much higher than $10.10 per hour.

Other politicians pointed out that the scope of the executive order would be much smaller than it sounds, stating that only approximately 10 percent of the 2.2 million federal contract employees currently make less than $10.10 per hour. Those are the only employees who would be covered under the order.

However, the Obama administration pointed out that the increase will still apply to 200,000 to 300,000 Americans, and will increase their standard of living. That is better than nothing, some politicians maintain. Others see this order as a push to pass the Fair Minimum Wage Act through Congress. Obama also commented, in his State of the Union address, that he would continue to encourage that bill, and for Congress to stand up for all workers in the United States by increasing the federal minimum wage.

Though the federal minimum wage is currently still $7.25 per hour, the minimum wage in California is $8.00 per hour for 2013. If you have any questions regarding minimum wage or other wage and hour issues, call the Pershing Square Law Firm today for help.