Biden raises hourly minimum wage to $15 for federal contractors in new executive order

President Joe Biden signed an executive order Tuesday that raises the minimum wage to $15 an hour for all federal contractors by 2022, while eliminating a lower minimum wage for tipped contractors.

The move will bring the minimum wage for contractors up from the current $10.95, under rules set during the Obama administration.

The current minimum wage for federal contractors who are tipped is $7.65 an hour. That will be phased out by 2024 under the new directive. The $15 wage will be mandatory in new contracts by the end of March 2022.

Senior administration officials briefed on the plan said they estimated that hundreds of thousands of workers who do contract work for the federal government — including cleaning staff, maintenance workers, nursing assistants in veteran care facilities, cafeteria and food workers, and laborers — would see wage increases as a result of the policy change.

And they said they did not believe that the change would cost jobs, citing an analysis by the president's Council of Economic Advisers. Rather, the administration officials said they believed it would increase worker productivity and lower other costs involved in supervising and training workers.

The policy, which has been long expected by some progressive advocates close to the administration, is the latest attempt by Biden officials to advance policies they say will address economic inequality and strengthen the middle class.

An expanded child tax credit in the stimulus package championed by the administration this year is expected to reduce child poverty by nearly half, though it expires at the end of this year.

Progressives and worker advocates have been pushing the administration to find other ways to increase compensation for minimum-wage workers.

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The president proposed raising the federal minimum wage for all workers to $15 an hour soon after his inauguration, but the proposal, which requires Congress to act, lost steam after the Senate parliamentarian ruled that it could not be passed through a budgetary process called reconciliation.

That meant it would need at least 60 votes to overcome a filibuster — an impossibility without significant support from Republicans. Many Republicans have said that raising the minimum wage so high would make it harder for businesses to pay workers, an argument that has divided business groups and the labor community for decades.

Raising the minimum wage to $15 an hour remains a priority for many Democrats, who say it’s a necessary update to a federal minimum wage — $7.25 an hour — that hasn’t been increased in more than 10 years.

"While it's a huge step for the federal government to show an example, we need to actually deliver results," said Larry Cohen, chair of Our Revolution, a Bernie Sanders-aligned political group. "This would be a big result for federal contractors, but there are many millions more that are obviously not covered, and we shouldn't give up on them either, and we should use the budget process because otherwise there's no chance of raising the minimum wage in the Senate."

Unlike that proposal, the wage increase for contractors can be mandated solely by the Biden administration. It will be enforced by the Labor Department.

A full-time salary at $15 an hour works out to $31,200 a year, which is still below what many advocates consider a living wage in more costly areas of the country. It will be indexed to inflation, so it will automatically rise along with cost-of-living increases. Recent estimates peg the number of contractors in the federal workforce at about 4 million people.