President Biden issued an executive order early Tuesday that calls for workers on federal contracts to be paid a $15 minimum wage.
Biden said he considers these workers critical to the functioning of the federal government and includes everyone from cleaning professionals and maintenance workers to nursing assistants who care for the nation’s veterans. It also applies to food service workers and laborers who are working on the President’s wide-scale infrastructure overhaul.
“This executive order will promote economy and efficiency in federal contracting, providing value for taxpayers by enhancing worker productivity and generating higher-quality work by boosting workers’ health, morale, and effort,” the White House said in a statement.
“It will reduce turnover, allowing employers to retain top talent and lower the costs associated with recruitment and training. It will reduce absenteeism, a change that has been linked to higher productivity, not just by the employees who are more present, but by their co-workers, too.”
Pinning its hopes to a recent Harvard study on the payoffs of higher pay, Biden is hoping his move will also reduce supervisory costs. The study findings show that raising the hourly wage of warehouse workers and customer service representatives at an unnamed Fortune 500 online retailer yielded a return of approximately $1.50 through increased productivity and reduced costs. If that study proves true for Biden, he feels confident that the federal government’s work will be done better and faster.
The pay raise specifics
Biden’s wage increase won’t show up in federal workers’ next paycheck, but he has locked it in to start in the opening months of 2022. Contract solicitations will need to use the new wage adjustment by the end of January, and all agencies will need to use the $15 minimum in new age contracts by the end of March. The White House said federal agencies must also put the higher wage into effect in all existing contracts when contracts are extended, which usually happens on an annual basis.
After the 2022 increase, Biden’s plan will continue to index the minimum wage to an inflation measure so that it can be reset each year to reflect changes in the most current cost of living benchmark.
Tipped workers will have a longer waiting period than other workers. The new plan will eliminate the tipped minimum wage for federal contractors by 2024. Even though federal statute allows employers of tipped workers to pay a sub-minimum wage, employers can do that only as long as an employee’s tips fill in that gap and bring their wage up to the level of the minimum wage. Biden said that this executive order will ensure tipped employees working on federal contracts will earn the same minimum wage as other employees on federal contracts.
Federal contract workers who have disabilities are also guaranteed a minimum of $15 per hour, as are outfitters and guides operating on federal lands. That last move revokes a previous executive order from President Trump.