Expected Impact of Minimum Wage Increase for Federal Contractor Employees

President Barack Obama announced during his state-of-the-union speech that he intends to raise the minimum wage for federal contractor employees to $10.10 per hour.  This change will apply to new contracts, which perhaps includes option years, and cover workers performing services or construction making less than $10.10 per hours.  The President intends on making this change through an Executive Order which at the time of this writing has not been published.

The largest impact will likely occur on contracts being performed at remote or very rural locations as urban areas typically have higher rates.  The greatest impact will also likely be on food service, custodial, and other low wage occupations.  Since SCA and Davis-Bacon Act wage determinations are based on surveys this increase in the minimum level will likely have an escalation effect on all other rates.

It remains unclear how the Administration will address other factors such as fringe rates on SCA or Davis-Bacon Act covered contracts, contracts for commercial services, and other issues.

This White House move is consistent with this Administration’s use, as well as previous Administration’s use of executive actions to influence labor policy in areas such as non-displacement of SCA employees and project labor agreements.