Obama to lift minimum wage for federal contractors to $10.10

PRESIDENT BARACK OBAMA will announce in his State of the Union address Tuesday night that he plans to raise the minimum wage for federal contractors to $10.10 an hour. / BLOOMBERG FILE PHOTO/ANDREW HARRER
PRESIDENT BARACK OBAMA will announce in his State of the Union address Tuesday night that he plans to raise the minimum wage for federal contractors to $10.10 an hour. / BLOOMBERG FILE PHOTO/ANDREW HARRER

WASHINGTON – President Barack Obama will raise the minimum wage to $10.10 an hour for federal contractors hired in the future, an initiative to be unveiled Tuesday night in his State of the Union address.

Obama will issue an Executive Order for the contract workers – including janitors and construction workers – and repeat his call to reluctant lawmakers to increase the minimum wage for all employed Americans.

Federal contract workers are paid $7.25 an hour, the rate for private-sector employers, White House spokesman Bobby Whithorne said Tuesday in an email. He said he didn’t have a cost estimate for increasing the minimum by 39 percent.

“We believe that this action will produce good value for the federal government,” Whithorne said. “Higher wages will attract higher-quality workers who are more productive, reduce turnover, which can significantly offset the cost of providing higher wages.”

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Republicans led by House Speaker John Boehner criticized the action as costing jobs while helping few workers, and a former Obama aide said it could be challenged in court.

The president is fulfilling a pledge made at a Jan. 14 Cabinet meeting to make 2014 “a year of action” by using his executive power. “We are not just going to be waiting” for legislation, adding that “I’ve got a pen and I’ve got a phone,” and pledged to use both to press the Congress.

‘Hundred thousand’

The wage increase will take effect when new contracts are signed and won’t cover existing employees until their contracts are renewed, according to a White House statement. Valerie Jarrett, senior adviser to Obama, said on Bloomberg Television on Tuesday the order covers “a couple hundred thousand” people.

Boehner, an Ohio Republican, said the move is a bad policy that will result in fewer people being hired as contractors.

“The question is how many people, Mr. President, will this executive action actually help?” Boehner told reporters on Tuesday. “I suspect the answer is close to zero.”

Demos, a New York-based public policy group that says it advocates to reduce economic inequality, praised Obama for helping thousands of Americans reach the middle class.

“While it’s unfortunate that the order does not apply to existing workers until their contracts are renegotiated, the president’s action adds momentum to the fight for a federal minimum wage increase that would benefit all Americans,” said Demos President-select Heather McGhee in an emailed statement.

2 million

Demos in May released a study that found almost 2 million workers on federal contracts, grants, loans, concession agreements and leases are paid less than $12 an hour.

There is “at least a legal cloud hanging over the administration’s authority to do this for federal contracting employees,” said Dan Gordon, associate dean for procurement law at George Washington University Law School in Washington and former top procurement official for President Barack Obama.

“I’m in favor personally of raising the minimum wage both for people who work under federal contracts and people who work every place in the United States, but that doesn’t mean the executive branch has the legal authority to do it without an act of Congress,” Gordon said in a phone interview.

A 1949 law gives the executive branch the power to “take steps for the economy and efficiency of the federal procurement system,” Gordon said.

Bush, Cheney

This order instead appears to stem from “an assessment of what is good for American society and the U.S. economy, which is recovering from a very serious recession,” he said. A contractor may choose to challenge the lawfulness of the planned order in court on this basis, he said.

Obama’s use of executive power is probably the most dramatic since the Bush administration and Vice President Richard Cheney’s assertion of powers for national security reasons, said Ross Baker, a political scientist at Rutgers University in New Brunswick, N.J.

“This is a warning shot, an indication the president intends to use these powers to the maximum,” Baker said. It may signal a larger battle with Congress over use of executive power. “That’s the heart of it,” Baker said.

Lawmakers ignored Obama’s plea in last year’s address to raise the minimum wage and congressional elections in November won’t make reaching an agreement any easier.

Dish washers

“It would be challenging to move the needle on inequality in the near term even with Congress’s cooperation,” said Jared Bernstein, Vice President Joe Biden’s former chief economist. “It would be really hard to do it without.”

The president is using leverage he has on the issue to increase wages for those employed through federal contractors and including U.S. military base employees, such as dish washers, food service personnel and laundry workers. The White House, in a statement, said the president will keep pressing Congress to raise the national minimum wage from the current $7.25 an hour.

Obama also could use regulatory authority to raise the salary threshold for exemption to the overtime rules in the Fair Labor Standards Act, effectively meaning many more workers would have to receive pay at time and a half for working more than 40 hours per week, Bernstein said.

In Rhode Island, Democratic gubernatorial candidates Angel Taveras and Gina Raimondo said last week that they both plan to raise the state’s minimum wage to $10.10 if elected. Republican candidates Ken Block and Allan Fung said they oppose a minimum wage increase.

Obama wants Congress to pass a bill by Sen. Tom Harkin and U.S. Rep. George Miller, both Democrats, to raise the federal minimum wage in stages to $10.10 an hour, and then index it to inflation.

Congress action

Miller, ranking Democrat on the House Education and Workforce Committee, in a statement on Tuesday applauded the order.

“Now it is time for Congress to join the rest of the country in raising the federal minimum wage to a level that will help lift working people out of poverty, create jobs, and help move America forward,” Miller of California said.

The White House argued in a fact sheet that Congress hasn’t increased the minimum wage in seven years, and that a full-time minimum wage worker earns about $14,500 a year, meaning a family of four “has to raise their children in poverty.”

Critics argue raising the minimum wage will squeeze businesses, adding to their costs and perhaps leading to reductions in employment. The administration has argued that countless studies debunk that argument, and that a higher wage stabilizes the workforce.

Obama tomorrow will make the argument when he appears at a Costco Wholesale Corp. store in suburban Lanham, Md. Costco has supported past increases to the minimum wage “because it helps build a strong workforce and profitability over the long run,” the White House fact sheet said.

Rep. Joaquin Castro, a Texas Democrat, said in an interview on MSNBC on Tuesday that should “really put the pressure on for raising the minimum wage and I do think that will bring Republicans to the table.”

Jarrett said Obama hasn’t given up on working with Republicans, and the president is always seeking ideas for improving legislation. “He doesn’t want to just hear what they’re against, he wants to hear what they’re for,” she said.

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