Everything You Need To Know About What President Obama’s Doing To The Minimum Wage

CREDIT: Flickr user guvnah

The downstairs food court at Washington, D.C.'s Union Station is staffed by low-wage workers paid with federal dollars.

The minimum wage is going to rise for over 500,000 American workers whether Congress likes it or not. In Tuesday’s State of the Union address, President Obama will announce a unilateral executive action to raise the minimum hourly pay that companies that receive federal contracts must offer, a victory for workers who have been walking off the job at federal facilities in Washington D.C. since last spring. The new $10.10 minimum wage will not apply to existing contracts, but all new contracts must comply with it.

Here is everything you need to know about the reported executive action, the employees it affects, and what it could mean for other low-wage workers around the country.

Who would the new $10.10 minimum wage apply to? The workers aided by this action are separate from the overall federal workforce. Civil service employees and others directly employed by the government are not affected. But the federal buildings where those civil servants work need to be cleaned by janitors, maintained by technicians, and have their food courts serviced by line cooks and waitstaff and fast food cashiers. There are roughly 560,000 people employed by those government contracts, according to Demos. Another 1.4 million low-wage workers whose jobs are supported indirectly by federal spending won’t be affected by this change, but Demos head Heather McGhee nonetheless said in a statement that “the president’s action adds momentum to the fight for a federal minimum wage increase that would benefit all Americans.”

Why do service workers at federal buildings need a higher minimum wage? The restaurant and building services companies that win the contracts to service federal buildings make a great deal of money for providing those services, but they tend to pay the workers who actually haul the trash and wrap the burritos a low wage. The average hourly wage for food prep and food service workers on federal contracts is $9.49 according to Demos, suggesting that many of the 560,000 total contract service employees in question currently make substantially less than that. Striking workers ThinkProgress spoke to like Courtney Shackleford and Justin New reported making $8.50 per hour at retail jobs in Washington D.C.’s federally-owned train station. Three out of four contract workers surveyed by the National Employment Law Project make less than $10 per hour.

Doesn’t Congress have to pass a law to raise the minimum wage? Millions of low-wage workers around the country await legislative action to raise the minimum wage, but the executive branch has discretion over the terms of the contracts it agrees to with the companies that provide services at federal buildings. That means Congress doesn’t have to sign off on a wage hike for the workers we’re talking about here. President Obama can’t alter the contracts already in force with these companies. But under the executive order he will announce Tuesday night, all future contracts will require that companies pay at least $10.10 per hour to the people who actually fulfill those contracts.

How did a raise for half a million workers make it into the State of the Union address? The workers who stand to benefit next year from this week’s announcement have been fighting to get Obama to take this step since at least last spring. On at least five separate days beginning last May, service contract workers have walked off the job and held rallies, often joined by members of Congress and community leaders, to pressure the White House into acting. After the first strike, about 10 participants were fired for their activism before eventually being rehired. The intimidation tactic didn’t stop the protests. The most recent strike involved service workers at the Pentagon.

A group of 17 progressive House members had also written to the White House demanding action, and Reps. Keith Ellison (D-MN) and Raul Grijalva (D-AZ) had been especially critical of the president’s silence in response to the strikes. All that pressure appears to have paid off, or at least dovetailed with the White House’s broader effort to circumvent Republican obstruction of its legislative agenda. Federal contracts are an opportunity for Obama to advance his economic policies despite conservative opposition to the overall minimum wage hike he wants.

What more could be done for the low-wage workers who fulfill federal contracts? The new minimum wage for federal contracts won’t apply to current contracts, which Demos’ McGhee called “unfortunate.” Assuming that the companies in question don’t voluntarily raise wages in anticipation of their contract renegotiations with the government, there are still a variety of ways lawmakers could make life better for these workers. For one thing, companies that violate U.S. labor law could be barred from federal contracts. The lack of such a prohibition meant that taxpayers sent $81 billion in 2012 to companies that had a combined 1,800 labor law violations over the previous six years. These companies not only pay low wages, but also steal from their employees, according to a pair of wage theft complaints filed in D.C. over the past several months. Cities like Houston and Chicago have passed laws that bar any company convicted of wage theft from winning city contracts — a policy that could be replicated at the federal level.

Meanwhile, the CEOs of these companies make $24 billion in taxpayer money each year from the same contracts that allow them to pay poverty wages to their workers. Another more complicated step to raise federal contract worker wages would involve capping the amount of money that corporate executives can be paid. According to Demos, capping the taxpayer contribution to corporate executive pay at the same level of the Vice President’s salary would free up enough money to give every federal contract employee a nearly $14,000 annual raise.

What does this mean for everybody else? Strikes by fast food and retail workers around the country over the past year and a half may place similar pressure on Congress to take action on moving the federal minimum wage in line with what economists say it should be. A $10.10 wage would restore the buying power minimum wage workers have lost to inflation since the 1960s, lift 6 million workers out of poverty, reduce the cost of public assistance programs significantly, and boost the country’s economic output by $22 billion per year.