On April 27, 2021, President Biden issued a new Executive Order that raises the federal contractor minimum wage to $15 per hour, from the current $10.95 per hour, starting January 30, 2022.
Biden’s new Executive Order is nearly a word for word retread of the Obama Administration’s Executive Order 13658 (originally setting a $10.10 federal contractor minimum wage), with some notable exceptions:
What remains the “same” is the following:
While the new Biden Administration Executive Order contains mostly the same language as Executive Order 13658, it remains to be seen whether the Secretary of Labor and the Federal Acquisition Regulatory Council simply amend the existing federal contractor minimum wage regulations to reflect the new $15/hour starting point, or whether more extensive and substantive revisions will be made.
As we wait for new regulations to be promulgated and in anticipation of the January 30, 2022 start of the new $15/hour federal contractor minimum wage, federal contractors and subcontractors subject to the new minimum wage requirements should:
Because the cost of the rise in the federal contractor minimum wage should largely—if not entirely—be absorbed into contractor pricing models and fully compensated by the federal government, perhaps the biggest concern arising from the new federal contractor minimum wage is the impact the new wage floor will have on employer/employee relations and a contractor’s ability to attract and retain skilled labor. The new $15 minimum wage will cause a rise in the wage rates for unskilled labor. Over time, the rising wage floor for unskilled labor will erode the wage differential between unskilled and skilled labor and may even start to approach the hourly rates for certain categories of semi-skilled and skilled labor. This has the potential to cause some discontent among skilled trade workers. How contractors address this risk of wage compression will be key and the potential solutions will vary by industry and based on the nature of each contractor’s workforce.