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Plan to hike minimum wage for federal contract workers wins praise, but impact may be limited

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WASHINGTON - President Barack Obama's plan to raise the minimum wage for federally contracted workers is winning praise from unions and labour activists, but it could take a year or more before any hikes take place and the impact may not be as widespread as some advocates had hoped.

Obama announced in his State of the Union address Tuesday that he will sign an executive order setting the minimum wage for workers covered by new federal contracts at $10.10 an hour, a hefty increase over the current federal minimum of $7.25.

"I think it's a huge step forward in that every action headed in the direction of lifting wages puts pressure on Congress to act," said Mary Kay Henry, president of the Service Employees International Union, which has spent millions to help federally contracted workers and fast-food employees organize protests and strikes to demand higher wages.

But the increase is only expected to cover about 10 per cent of the 2.2 million federal contract workers overall, since most of those employees already make more than $10.10. It won't take effect until 2015 at the earliest and doesn't affect existing federal contracts, only new ones.

Another wrinkle: The order won't affect contract renewals unless other terms of the agreement change, such as the type of work or number of employees needed, according to White House officials.

That caveat is raising concerns for Rep. Keith Ellison, D-Minn., who has spent months urging Obama to increase wages for contractors. While Ellison called the announcement "a great first step," he said he wants to make sure it's implemented the right way.

"If you renew a contract, we expect everyone to make $10.10," Ellison said.

Ellison said White House officials have estimated that about 200,000 low-wage workers would be affected by the order, including food service workers in federal buildings, security guards, cleaners and groundskeepers.

The White House has not said whether the wage increase will be indexed to go up as inflation rises, but that is also something Ellison would like to see once the executive order is drafted.

Obama hopes his order will pressure Congress "to get on board" and pass legislation increasing the minimum wage to $10.10 for all employees.

The move is sure to add to the growing debate about whether workers in low-wage industries like retail and fast-food should be paid more. And it is winning wide praise from Democratic lawmakers who want to pass a wage increase this year.

Obama's announcement was a victory for labour unions who have stepped up public pressure on Obama to help raise wages. Government contract workers — with the backing of unions and other worker advocacy groups — have held protests seven times since last May to protest low pay for those working at landmark government buildings, including the Pentagon, the Smithsonian museums and Union Station. Those protesters have specifically called on Obama to raise their wages through an executive order.

Matthew Shay, president and CEO of the National Retail Federation, said raising the minimum wage would place a new burden on employers and hinder job creation.

"It's simple math — if the cost of hiring goes up, hiring goes down," Shay said.

Over at the U.S. Chamber of Commerce, senior vice-president Randy Johnson said the order appears to be very limited, but he's waiting to see the fine print. Johnson also questioned whether Obama has legal authority to issue an order that conflicts with current federal minimum wage legislation passed by Congress.

A recent survey by the National Employment Law Project found that 77 per cent of government contract employees who work in food service, retail or janitorial service earn less than $10 per hour. About 4 in 10 of those workers depend on public assistance programs such as food stamps and Medicaid, the study by the worker advocacy group found.

The latest Associated Press-GfK poll found that 55 per cent of Americans back an increase in the minimum wage, while 21 per cent oppose it and 23 per cent are neutral. Most, 52 per cent, say an increase in the minimum wage would do more to help than hurt the economy, while 27 per cent feel it would do more harm than good. One in 5 thinks it wouldn't have much impact on the economy.

Among Democrats, 77 per centfavour an increase and 10 per cent oppose it. Among Republicans, only 32 per cent support an increase, 39 per cent are opposed and 29 per cent are neutral. The poll's margin of error was plus or minus 3.9 percentage points.

Christine Owens, executive director of the National Employment Law Project, said Obama's order could have a ripple effect on private employers in some industries and may help other workers who already earn slightly more than $10.10 get a wage boost as well. That has happened in past years when Congress raised the minimum wage, she said.

"Any concrete step that moves in the direction of raising wages for any workers contributes positively to the debate," Owens said.

Unions representing federal workers applauded Obama's announcement but complained that the president should also be supporting legislation to increase wages for the government's own employees who earn less than $10.10 an hour.

"If the president is to have any credibility in talking about living wages, he needs to get his own house in order first and do everything in his power to establish $10.10 as the minimum wage for all federal hourly workers," said J. David Cox, president of the American Federation of Government Employees.

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Associated Press Director of Polling Jennifer Agiesta contributed to this report.

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Follow Sam Hananel on Twitter at http://twitter.com/SamHananelAP

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