President Joe Biden on Tuesday signed an executive order increasing the minimum wage for federal contractors and effectively eliminating the tipped employee minimum wage for federal contractors by 2024.
Update: The official publication in the Federal Register.
The Current State of Federal Workers Minimum Wage
The current minimum wage for federal workers is $10.95 per hour and the tipped employee minimum wage is $7.65, both well above the standard federal minimum wage rates. Assuming a regular 40-hour work week, these wages would equate to an annual income of approximately $22,000 and $15,900, respectively.
Rationale for Increased Minimum Wage Under the Executive Order
Pursuant to the executive order, “raising the minimum wage enhances worker productivity and generates higher-quality work by boosting workers’ health, morale, and effort; reducing absenteeism and turnover; and lowering supervisory and training costs. Accordingly, ensuring that federal contractors pay their workers an hourly wage of at least $15.00 will bolster economy and efficiency in federal procurement.”
New Requirements Under the Executive Order
Here is a breakdown of the requirements under Biden’s executive order:
- Beginning Jan. 30, 2022, minimum wage for federal contractors increases to $15
- Beginning Jan. 1, 2023, the minimum wage will be indexed annually and published at least 90 days prior to the effective date of the updated wage
- Increase federal contractor tipped employees minimum wage to $10.50 beginning Jan. 30, 2022
- Beginning Jan. 1, 2023, federal contractor tipped employee minimum wage must be 85 percent of the indexed wage
- Beginning Jan. 1, 2024 and every subsequent year, federal contractor tipped employee minimum wage must be 100 percent of the indexed wage under this order
All agencies must incorporate the increased minimum wage into their contract solicitations beginning Jan. 30, 2022, and must implement the new $15 minimum wage into new contracts by March 30, 2022.
Regulations providing further information for this order are expected to be issued by Nov. 24, 2021.
Will This Mean Further Minimum Wage Hikes in the Private Sector?
Currently, there are a multitude of local and state laws with minimum wage rates higher than the federal wage rate of $7.25. This increase in the federal contractor minimum wage may break loose additional actions raising minimum wage in the private sector. Time will tell.