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On Tuesday, President Joe Biden signed an executive order to increase the minimum wage to $15 an hour for federal contractors. It would provide a pay boost to hundreds of thousands of workers. The increase could be dramatic for workers earning the current minimum of $10.95 an hour. That amounts to a $4.05 per hour increase for contract workers making the minimum now, a 37% pay bump, although the increase would be rolled out gradually. Tipped contract workers would make $7.35 more per hour, which is 96% more than their current rate. The order would not change the wages for any existing contracts, but it would be required for every contract signed after 30^th March 2022. Point to be noted that the new tipped minimum wage would not need to take effect until 2024.

The Biden administration officials said the higher wages would lead to greater worker productivity, offsetting any additional costs to taxpayers. The White House issued a statement and said, “This executive order will promote economy and efficiency in federal contracting, providing value for taxpayers by enhancing worker productivity and generating higher-quality work by boosting workers’ health, morale, and effort”. However, the officials didn’t mention how many workers for federal contractors would receive a raise. A public policy professor at New York University, Paul Light said that there are an estimated 5 million contract workers in the federal government. The White House said the workers would include cleaning professionals and maintenance workers, nursing assistants who care for veterans, cafeteria workers providing for the military, and laborers who build and repair federal infrastructure.

All US federal agencies would need to include the higher wage in new contract offerings by 30^th January 2022. So, agencies would need to implement the higher wage into new contracts by 30^th March. The increase would also be in existing contracts that are extended. The wage would be indexed to inflation, so it would automatically increase with each year to reflect changes in prices. The tipped minimum wage of $7.65 an hour for federal contractors would be replaced by the standard minimum by 2024. President Biden has pushed to establish a $15 hourly minimum wage nationwide for all workers, making it a part of his coronavirus relief package. But the US Senate parliamentarian said the wage increase didn’t follow the budgetary rules that allowed the $1.9 trillion plan to pass with a simple majority.