President Barack Obama plans to issue an executive order raising the hourly minimum wage for services contractors working under federal contracts to $10.10 and intends to announce the move in the State of the Union Address Tuesday night.
The White House said the executive order will benefit low paid workers who provide services at military bases, such as laundry and food, and lead to higher morale and more productivity for services provided to the government by those contracted employees.
The White House in a posting on its website Tuesday said the executive order is part of an initial step to push legislation through Congress that would raise the nationwide minimum wage to the same amount from the current level of $7.25 per hour.
Contracting companies will be able to manage the impact over time because it will be phased in under new contracts and will not be immediate “so contractors will have time to prepare and price their bids accordingly,” the White House said,
Byron Callan, a defense market analyst at Capital Alpha Partners, said he does not believe the executive order will have much of an effect on major defense companies who provide engineering and other high-end services to the Pentagon.
“Clearly it will affect someone,” he said. “My sense is it really shouldn’t have any impact on the primary U.S. defense contractors.”
The Professional Services Council, an organization that represents government contractors in Washington, was more critical of the measure, saying it will have little impact because contractors “overwhelmingly” meet requirements higher than Obama’s that are already outlined by the Department of Labor under the Service Contract Act.
“The real issue is ensuring that (the Department of Labor) does a better job of maintaining the currency of its wage requirements,” said Stan Soloway, the president and CEO of the PSC. Soloway said his greater concern is that government contractors are being singled out by an executive order that could leave some to believe that the companies are paying “substandard wages.”
“The requirements of the federal prevailing wage laws and the government’s central role in determining the definition of a fair and reasonable wage are clear and long-standing,” he said. “Moreover, there is natural concern that, amid a national debate over the minimum wage, government contractors are being uniquely singled out.”