One of the first fruits of a series of one-day strikes by low-wage employees of federal contractors last year was the broadening of a Labor Department rule to make fast-food workers on military bases eligible for a health-and-welfare benefit of $3.81 an hour.
The promise was enhanced in February when President Obama signed an executive order to raise the minimum wage for workers on new federal contracts from $7.25 to $10.10 an hour beginning in January.
But those increases — part of Democrats’ efforts to raise stagnant wages and begin to address the nation’s growing economic inequality — are now bumping up against economic reality in a way that could test the resolve of Obama and other Democrats.
Republican lawmakers and Defense Department officials say the wage increases could drive many fast-food restaurants and the thousands of jobs they provide away from military bases. They have asked the Obama administration to exempt fast-food concessions on military bases from the wage increases.
The proposed increases “require concessionaires to pay wages from over 50 percent to nearly 70 percent higher than the prevailing local rates and increase minimum wages by an even greater percentage,” read a letter to the Labor Department from Russell Beland, deputy assistant secretary of the Navy.
Rep. Joe Wilson (R-S.C.) said in an interview that “the unintended consequence of hiking the minimum wage is to ultimately close fast-food restaurants on military installations.” He noted that military officials and lobbyists for the industry say that several have already closed across the country.
Wilson was among 40 lawmakers who signed a letter asking the Labor Department to exempt military installations from the wage hikes. They noted that many fast-food restaurants are limited by their contracts in how much they can raise prices on military bases. Moreover, they said, if prices go up too much, people will simply frequent fast-food restaurants off-base.
The department is reviewing the increases, but supporters of the wage hikes are urging the agency not to back down.
“I hope the Labor Department upholds the wage and offers to work with those franchises to find some way to meet the intent of the order,” said Rep. Raúl M. Grijalva (D-Ariz.). “It is not like this will mean economic ruin for these companies.”
Progressive groups that have been pushing the Obama administration to do more to support low-wage workers call the review a test of the president’s commitment to raise living standards for low-wage workers.
“I think the president in his State of the Union address made it clear that people working for the federal government should make a living wage,” said Charles Chamberlain, executive director of Democracy for America. “He recognized he could do that right now, and raising wages for people who work on military installations is part of that commitment.”