Who are federal contractors benefiting from the minimum wage raise?

By Adam Robinson,
February 27, 2014

This is a guest blog written by Snagajob, America’s largest hourly employment network for job seekers and employers. To attract qualified candidates to your open positions, post to Snagajob directly through Hireology. 

‘Give America a raise.’ That was the key takeaway from President Barack Obama’s State of the Union address on February 12.  A few weeks later, Obama put words into action when he signed an executive order declaring that all future government contracts would adhere to the new minimum wage of $10.10 an hour. In the midst of polarizing minimum wage debates, this new order promises to be an example for congress and serve as the first step toward a new national wage.

Why contractors?

The government hires third-party organizations to supply workers for places like military bases and federal buildings. These contracts allow our government to maintain a manageable size and receive services at lower prices than direct hiring. The federal procurement law authorizes the president to make improvements for federal contracting but he’s unable to change the national minimum wage without help from congress. By signing the new executive order, Obama is working within his power will help push congress toward national legislation (Scalia).

Who is affected?

The 77 percent

According to White House officials, about 200,000 will be affected by the change. This number includes construction workers, groundskeepers, security guards, cooks, and food service workers in federal buildings and military bases. The National Employment Law Project found that 77 percent of government contract employees in janitorial, retail or food service earn less than $10 per hour (Hananel).

Mentally and physically disabled

Since 1938, the Fair Labor Standards Act has allowed federal contractors to pay subminimum wages to physically and mentally disabled employees. Contractors used a sliding scale to determine an employee’s wage based on productivity. By including disabled workers in his executive order, President Obama will ensure that all federally contracted workers are compensated fairly (Huppke).

It’s hard to say how new policies will play out but some companies are already following the President’s lead by voluntarily raising minimum wages. Wholesale retailer Costco is also leading the forefront with a starting pay of $11.50 for hourly employees. Costco has even won praise from the president in a recent press release. “Costco is an example of a business that is acting on its own to pay its workers a fair wage, supporting increases to the minimum wage because it helps build a strong workforce and profitability over the long run through increased productivity, better morale and lower turnover rates,” said President Obama (Lewitinn).

As the president continues to urge cities and states to pass their own minimum wage increases, he promises to work with Congress on a national raise. The new executive order may just be a pebble in the recent wage debates but the ripples are already carrying us towards change.   

Content provided by Snagajob, America’s largest hourly employment network for job seekers and employers. For more Snagajob content, visit www.snagajob.com/employer-solutions/blog.


About the Author

Adam co-founded Hireology with the mission to help growing companies make better hiring decisions through data and better technology. Adam is passionate about entrepreneurship, donating time to a number of organizations that support the entrepreneurial cause. Adam completed his undergraduate study at the University of Illinois at Urbana-Champaign, and received his MBA from DePaul University in Chicago, IL.

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