Labor and civil rights groups celebrated Tuesday when President Obama said he would require a $10.10 minimum wage for new federal contracts, but industry groups questioned the move and said the additional costs will be passed right back to the U.S. government.
Good Jobs Nation, a coalition of labor and civil rights groups that has organized seven demonstrations in the District of Columbia since May on behalf of contract workers, cheered the decision but said it was a partial victory. In addition to a call for higher pay, protesters have demanded improved working conditions and collective bargaining for employees.
The group said, however, that Obama’s pledge sets an example in the midst of a nationwide debate over income inequality.
“What this shows is that workers can win when they act, and not just for contract workers in D.C.,” said Joseph Geevarghese, deputy director of the Change to Win labor group, which is part of the coalition. “What’s significant is the symbolic effect. It’s a signal that could move into the private sector with employers like McDonald’s and Wal-Mart. Workers will be more emboldened when they realize President Obama is on their side.”
Obama promised to issue an executive order to establish the new rate for contract employees in his State of the Union speech, saying, “If you cook our troops’ meals or wash their dishes, you shouldn’t have to live in poverty.”
But the Professional Services Council, a group that advocates for government contractors, said the administration seems to have singled out federal contractors among the nation’s employers.
Alan Chvotkin, the group’s executive vice president, said the wage increase is not likely to significantly change the bidding landscape.
“It may keep out some companies that are not in the federal marketplace today, but it won’t dissuade anyone who is already there from continuing to compete,” he said.
Chvotkin added that the wage increase will create additional costs that the government will ultimately bear as some projects and services become “a little more expensive.”
Industry experts said the wage increase is likely to affect only a small subset of companies that do business with the government.
“I think the order is largely symbolic in nature and wouldn’t affect that many contractors,” said Eric Sobota, a managing director for BDO, a firm that provides consulting on federal-contract pricing, compliance and other issues.
Sobota agreed with Chvotkin about industries passing on the expense, noting that the new limit could increase payroll and associated overhead costs for contractors. “That could compound the overall price for the government,” he said.
The White House said Tuesday that the executive order would benefit the government and “hardworking people” alike, adding that “boosting wages will lower turnover and increase morale and will lead to higher productivity overall.”
The proposed mandate is expected to affect a small group of federally contracted workers who perform a broad range of jobs, whether it’s washing dishes or doing laundry at military bases or selling souvenirs at the Smithsonian museums.
Lizbeth Caceres, a 46-year-old single mother of two who works at a Pentagon McDonald’s, said the president’s order could help her make ends meet.
“I earn $8.43 an hour,” she said through an interpreter. “I have rent and other bills, and we have to pay out of pocket if we get sick. You can imagine how difficult it is.”
Caceres said she lives with her parents in Arlington County and receives no public assistance.
The White House said in its announcement Tuesday that Maryland experienced an “increase in the number of contractors bidding” after passing its living-wage legislation in 2007 for companies that contract with the state.
The White House did not respond to a request Wednesday for more explanation of its assertion, and the Maryland Board of Public Works, which handles procurement for the state, said it could not immediately provide its numbers when reached Wednesday.
Some labor groups have called on Obama to do more on the minimum-wage issue. The National Federation of Federal Employees on Wednesday noted that the executive order would not help hourly workers who are directly employed by the federal government.
“The president needs to stand with all federal workers, not just federal contractors,” said William Dougan, the union’s president. “We believe that raising the minimum wage for federal hourly employees is the low-hanging fruit, and the president can demonstrate his dedication to raising the minimum wage by doing so.”
In his address, Obama called on Congress to pass legislation that would raise the federal minimum wage for all employees from $7.25 to $10.10, telling lawmakers: “Say yes. Give America a raise.”
Obama also encouraged states to raise their wage requirements, and he called on business leaders to increase their employees’ salaries.
On Wednesday, he began a four-state tour to promote his agenda, starting in Maryland. Gov. Martin O’Malley (D) has proposed raising the minimum wage there to $10.10 an hour.