But at the onset of 2023, the administration increased that wage again to $16.20 per hour. Let’s take a look at why this issue is so important and how it could affect federal contractors.
“The president here relied on a broad statutory delegation to exercise proprietary authority in an area — general administrative control of the executive branch — over which he enjoys inherent powers,” U.S. District Judge John Tuchi wrote in his Jan. 6 ruling.
The specifics
The new $16.20 minimum wage would directly benefit around 1 million federal contract workers. This includes janitorial staff, security guards, cafeteria workers, and other service employees who work on government contracts. The proposed increase would also extend to those who are indirectly impacted by these contracts—for example, subcontractors whose wages are set by their employers based on government contracts.
In addition to raising wages for these workers, the Biden administration has argued that the new minimum wage will make federal contractors more competitive in bidding for government projects. In other words, they will be able to offer higher quality services than before because they can pay their employees better wages. As a result, they will be more likely to win federal contracts and provide even better services to the government.
The Opposition’s Argument
The administration’s attempts have not been universally supported. In fact, the Attorneys general for Arizona, Idaho, Indiana, Nebraska, and South Carolina led the lawsuit in 2021 and unsuccessfully sought a preliminary injunction to block the new minimum wage for federal contractors.
The opposition still claims that businesses cannot afford to pay higher wages without raising prices or cutting jobs — both of which would have a negative impact on businesses and their employees alike. They also argue that raising wages too quickly could lead to inflationary pressures in an already fragile economy.
Conclusion:
Despite pushback, The Labor Department estimates approximately 327,000 employees will see an increase in wages in the first year of implementation and will cost higher rates to the tune of $1.7 billion per year over 10 years — funds that contractors may deduct from their state taxable incomes.
Furthermore, the judge found that the new, higher minimum wage created no greater burden on federal contractors under FPASA, though the Biden administration continues to struggle with implementing the wage demands on federal vendors that provide ‘recreational activities on federal lands,’ which remain exempt from wage hikes since the Trump era.
