Minimum wage that 'makes a difference'

Getty Images

At a White House ceremony on Wednesday, during which he signed an executive order to hike the minimum wage for federal contractors, President Obama proudly declared the move “will make a difference for folks.”

But how much of a difference the presidential directive will make remains very much an open question. 

ADVERTISEMENT
Federal contractors and business groups largely shrugged at the executive order, which would mandate a $10.10 hourly rate, saying it would affect only a small number of workers. The directive won’t set in until 2015, applies only to new federal contracts and benefits just the small fraction of the federal contracting workforce making low hourly wages.

Meanwhile, the president’s own Labor secretary admitted he could not precisely calculate how many workers would see pay increases — only predicting “hundreds of thousands”— and that he didn’t know how long it would take for workers to see the benefits on their paycheck. 

“As we develop the regulations, we will have a better sense of that. And as soon as we have that better sense, we will let you know,” Thomas Perez told reporters.

Ross Eisenbrey, a vice president at the Economic Policy Institute, said his think tank provided the White House with estimates that the order would help “somewhere around a quarter million people” over time.

But according to a study by New York University professor Paul Light, there were 7.6 million contractors working for the federal government in 2005 — a number that has likely increased in recent years. Even at the 2005 number, just over 3 percent of the contractor workforce would stand to benefit from the move.

Stan Soloway, the president of the Professional Services Council — a trade association for government contractors — said Obama’s order “does not appear to be hugely impactful” for companies providing the government with services and work.

He noted contractors are already forced to pay workers so-called “prevailing wages” — a safeguard adopted decades ago that prevents bidders on federal contracts from cutting costs by slashing pay. Those wage levels are set regionally by the Department of Labor, and regularly exceed $10.10 in more expensive areas.

“The concern from our membership is more the implication, in the White House’s approach, that they’re underpaying their workers. The vast preponderance are paying what the government tells them they have to pay,” Soloway said.

The Chamber of Commerce warned that raising the minimum wage would “lead to less job creation and higher unemployment that falls disproportionately on the weakest segments of society, those with few skills and lower training.”

But Randy Johnson, a senior vice president with the group, said “based on discussions with our members, the impact of the executive order seems minimal.”

Still, the White House bristled at suggestions the move was purely symbolic.

“I think that symbols, by definition, are not substantive,” press secretary Jay Carney said. “This has a substantive effect on federal contractors and those who make below $10.10 an hour. ... Those are real people for whom this will mean a very positive change.”

But Carney allowed that the order “doesn’t resolve the problem more than need to raise the minimum wage across the country.”

“That’s why we’re calling on Congress in the same breath to take action,” he said.

The White House isn’t hiding its hope that it can use the order to ratchet up pressure on lawmakers to pass a national wage hike, raising the current $7.25 federal rate to $10.10. 

At his event on Wednesday, Obama implored Congress to act.

“Members of Congress have a pretty clear choice to make right now: Raise our workers’ wages, grow our economy, or let wages stagnate further and give workers what amounts to another pay cut this year,” Obama said.

The president also encouraged activists and minimum wage employees gathered to lobby lawmakers.

“Ask your senator, ask your representative in the House: Do you support raising the federal minimum wage to $10.10 an hour? If they say yes, tell them good job. You know, they don’t hear that that often, so give them a pat on the back, give them a hug and let them know, way to go. That’s the right thing to do.

“If they say no, you know, be polite — I mean, don’t just yell at them — but say, ‘Well, why not?’ Ask them to reconsider, siding with an overwhelming majority of Americans,” the president continued. 

Two recent polls suggest voters do back an increase. Of those surveyed in a recent CBS News survey, 72 percent said they backed raising the minimum wage to Obama’s proposed level. Seventy-three of respondents in a Pew survey also agreed.

That public sentiment could provide Democrats with a dangerous weapon in the coming midterm elections.

The president’s move could also compel sympathetic local governments to undertake minimum wage hikes, or similar wage increases on their own contracts, Eisenbrey says. Recently, city and county councils in Maryland and the District of Columbia voted to raise their minimum wages in a coordinated effort. New Jersey voters backed an $8.25 wage last year, and cities like San Francisco and Santa Fe also require higher wages.

 “Every time a government raises the minimum wage, it makes it easier for the next state government to do it, the next local government to do it,” he said.