Today the Biden-Harris administration issued an executive order requiring federal contractors to pay a minimum wage of $15 per hour. This is very welcome news. We estimate that up to 390,000 low-wage federal contractors will see a raise under this policy, with the average annual pay increase for affected year-round workers being up to $3,100. Roughly half of workers who would see a raise will be women and roughly half will be Black or Hispanic workers.
To arrive at these estimates, we first estimate the state- and industry-specific shares of federal contract employment using FY2020 federal contract obligations from USA Spending and input-output tables from 2019 Bureau of Labor Statistics employment requirements data. We then combined these results with the EPI Minimum Wage Simulation Model, assuming that the state- and industry-specific wage distributions for federal contractors are similar to the state- and industry-specific overall wage distributions. Following this methodology, we project that the policy will raise wages of up to 390,000 federal contractors in 2022. We say “up to” 390,000 to account for the fact that some workers who would otherwise be affected by a $15 minimum wage will already be receiving a higher wage as a result of the Davis-Bacon Act or the Service Contract Act. An extreme lower bound for the number of contract workers affected by this executive order after accounting for these other wage standards is 226,000. (This lower bound is generated by entirely excluding the construction industry and, outside of construction, raising the underlying wage distribution by an industry-specific union wage premium.)
We are thrilled that the administration is increasing the minimum wage for workers on federal contracts to $15 per hour and raising wages for hundreds of thousands of workers, and we encourage the administration to go further to help ensure that the estimated two million total jobs held by federal contract workers are good jobs. This would include steps like ending practices that allow low-road contractors to win bids that are so low they are inconsistent with decent pay and working conditions, and banning federal government contractors from requiring contract workers to sign forced arbitration and class action waivers, which limit the ability of these workers to challenge illegal practices.