Little Rock  The President in his fifth State of the Union address said that he would issue an executive order raising the minimum hourly wage for workers employed under federal subcontracts to $10.10 per hour, the same number that he and many others have been advocating on the stair step proposal for the federal minimum wage.  Some observers dismissed the impact as relatively unimportant, only affecting a couple of hundred thousand workers over coming years, since the measure only goes into effect for new contracts or as existing contracts come up for renewals.   Is this just a symbolic gesture?  I don’t think so.

            Demos, the research organization, has indicated that there are 560,000 workers making less than $12.00 per hour, and, yes, that’s more than $10.10 per hour, but all of them, and likely many more federally contracted workers will be impacted because of the impact of both wage “compression” and the attending multiplier impacts that could bring higher wages to millions of workers. 

Compression is straightforward.  If the minimum wage is $7.25 as it is now, and you are making $12 per hour or more, then employers can say, “What’s the beef,” and workers can look down and around, and reckon the unlikelihood of doing better.  If the minimum is $10.10, then $12 is bumping right into it, and is no longer as respectable a wage.  The President’s number sets the minimum standard for any wage determination set by the Department of Labor and will require the DOL to similarly adjust the minimum rates on all other contracts upward.  Furthermore under section 4c of the Service Contract Act it also makes much more elastic what are inarguably reasonable settlements on wages for collective bargaining contracts.   The impact on local economies in Washington, D.C. and wherever there are federal installations from military facilities to regional governmental offices is potentially huge.

            The other nice touch on this executive order is the fact that for the first time it is automatically linked to inflation so there’s a built in escalator, similar to what we have all advocated for decades now for the federal minimum wage to get around the Congressional stalls that have reduced the minimum wage’s purchasing power so dramatically over the last 30 years.  This is an executive order then that will keep on giving as it moves the floor higher annually, and once again will create a cost of living adjustment in effect for all federally contracted workers.  Sweet!  And, the impact is huge and will also keep touching millions of workers.

            Finally, there’s the economic impact of the moral suasion of such an order.  President Kennedy’s executive order allowing collective bargaining for federal employees unleased the dam blocking public sector bargaining across the country and unleashing the pent up organizing demands of millions of workers who are now represented by unions.  I’m sure the President is hoping his big step on minimum wages for federally contracted workers will have the same impact on raising wages for private sector, largely unorganized workers across the country. 

            And, you know what, it just might!