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Obama to order higher minimum wage for fed contractor employees

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in Compensation and Benefits,Human Resources

President Obama plans to issue an executive order (EO) requiring federal contractors to pay employees at least $10.10 per hour, starting in 2015. The announcement came during Obama’s Jan. 28 State of the Union address, in which he also called on Congress to pass legislation raising the national minimum wage to $10.10 per hour, a 39% increase above the current federal minimum wage of $7.25.

Obama said the order would require contractors to pay federally funded employees the higher wage “because if you cook our troops’ meals or wash their dishes, you shouldn’t have to live in poverty.”

“This action will cover workers who are performing services or construction,” a White House statement said.  

Questions that can’t be answered until the Obama administration issues the executive order:

  • Will the higher minimum wage apply only to prime federal contractors, or will subcontractors have to comply as well?
  • Will there be compliance thresholds tied, for example, to the dollar value of a contract or the number of employees working on federal contracts?

“The increase will take effect for new contracts after the effective date of the order, so contractors will have time to prepare and price their bids accordingly,“ the White House statement said.

It’s unclear how many employees will get a pay raise as a result of the EO. One 2013 survey by the National Employment Law Project found that 74% of service employees working for federal contractors earn less than $10 per hour.

The president’s announcement came amid a broader call for higher wages for America’s lowest paid workers. “Tonight, I ask more of America’s business leaders to … do what you can to raise your employees’ wages,” Obama said. He urged “every mayor, governor and state legislator in America” to enact local legislation raising the minimum wage.

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