Eugene Scalia and Rachel Mondl are lawyers in Washington. Scalia was solicitor of labor for President George W. Bush.
In setting a $10.10 minimum wage last week for workers on federal contracts, President Obama acted on his State of the Union vow to use executive powers to bypass Congress “wherever and whenever” he deems it necessary. But the legal basis for the president’s order is shaky and, if challenged in court, could diminish the presidential powers that Obama seeks to expand.
The principal legal basis for the new minimum wage is the federal procurement law, which authorizes the president to issue directives for more “economical” and “efficient” federal contracting. Accordingly, Obama’s executive ordermakes claims about the government savings and efficiencies that would supposedly result from raising the minimum wage. A higher wage “increases [workers’] morale and the productivity and quality of their work, lowers turnover and its accompanying costs, and reduces supervisory costs,” the order says. This would yield “savings and quality improvements” that would improve “economy and efficiency” in government procurement.
This explanation is not credible. No purchaser insists that its suppliers pay workers more in order to lower the cost of goods. To the extent that businesses can deliver better service at lower cost by raising wages, they’ll do so themselves in response to market incentives, and their increased efficiency would result in a lower overall bid price. Moreover, what does the president know about the specific level at which to set minimum wages to optimize suppliers’ performance? Just a year ago, Obama thought $9 was the correct across-the-board minimum wage.
The real reason for the wage order, of course, is the president’s belief that workers deserve a higher wage. In using the procurement power as a pretext, he’s following a practice of his predecessors that the courts have indulged for too long.
President Bill Clinton, for example, based a 1995 executive order on the claim that companies are better off when they allow themselves to be shut down by a strike rather than hire replacement workers to stay open. On the theory that this produces savings that are passed on to the government, Clinton barred federal contracts with companies that hire replacement workers. The U.S. Court of Appeals for the D.C. Circuit struck down that order, but not on the grounds that it was a gift to organized labor that had nothing to do with efficient contracting. No, the court said that Clinton’s order was preempted by federal labor law.
President George W. Bush had better luck defending his executive orders, including one that required contractors to post notices about workers’ right not to join a union. Bush reasoned that “when workers are better informed of their rights . . . their productivity is enhanced.”
Now, Bush did once own a business, and it’s possible that he regularly invited union bosses and plaintiffs’ lawyers to talk to the Texas Rangers to, say, boost their on-base percentage. But it’s a better bet that Bush, like Obama and Clinton, was wielding the procurement law in the proxy war over labor rights.
The D.C. Circuit surmised as much, calling the link that Bush cited “attenuated.” But the court considered itself bound by its leading precedent in this area, a 1979 decision upholding an executive order by President Jimmy Carter that sought to reduce inflation by forcing contractors to abide by wage and price ceilings.
Obama probably will invoke that decision if his minimum-wage order is challenged in court. Yet in both rationale and effect, the Obama order is the exact opposite of Carter’s: Carter sought to limit wages on the theory that if wages are low, the government spends less. Obama asks us to conclude that the government spends less when it requires workers to be paid more.
The point is not simply that in this instance, at least, Obama’s judgment about basic economics is worse than Carter’s. It is also that presidents have been misusing their procurement authority by making increasingly implausible claims on matters they know little about so they can further ends unrelated to saving taxpayer dollars.
Executive orders under the procurement law possess neither the democratic pedigree of laws passed by both houses of Congress nor the nonpartisan expertise that is thought to characterize rules prepared by career civil servants. This most recent order, by creating a clear conflict with the leading precedent, gives courts a chance to begin placing limits on a power that has been abused by Democratic and Republican presidents alike.
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