• Brandon Colvin

Federal minimum wage hike could raise worker pay by $5K annually

The coming new year will bring with it more earning and spending power for federal contractors making minimum wage. Starting on January 30, 2022, contractors for the federal government will see the minimum wage increase to $15 per hour. Currently the minimum hourly rate for government contractors is $10.95.

President Joe Biden signed the executive order yesterday, roughly seven months after he signed an initial order directing the Department of Labor to develop the regulation. Now that the directive is enshrined in U.S. policy, all new federal contracts will adhere to the updated wage rate. An estimated 300,000 workers will be impacted by the change since the rule will apply to new contracts, as well as renewals and extensions of existing contracts. The Department of Labor issued the Final Rule on Monday.

Many workers whose contracts fall under the Service Contract Act, the Davis Bacon Act, or the Fair Labor Standards Act will benefit from the updated wage floor. Contractors employed on federal properties as well as those working under service or construction contracts with the government are also included under the rule change and will likely be impacted most, according to Jessica Looman, acting administrator for the Labor Department’s Wage and Hour Division.

Looman told reporters Monday that federal maintenance workers, child care professionals, and food service workers are among those likely to see their paychecks increase. On average, the government's lowest paid wage workers will see an annual raise of $5,228.

"It's a step in the right direction," said Looman.

Labor Secretary Marty Walsh celebrated the move in a call with reporters and referred to federal contractors as "essential workers,"

"The people who we're going to be covering clean and maintain federal buildings. They provide child care for kids, they repair roads and bridges all across this country," said Walsh.

Half of the affected workers are women, 25 percent are Hispanic and 15 percent are Black.

Impacted workers will also see gradual pay increases over time under the new executive order since the pay raises will be tied to an inflation index. Starting January 1, 2023, and every year after, the minimum wage amount will increase to an amount determined by the Labor Secretary based on inflation.

Additionally, the rule will phase out the tipped minimum wage, which is currently $7.65 an hour, by 2024.

“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.