Heritage: Biden's minimum wage order actually penalizes employers

Wednesday, April 28, 2021
 | 
Chris Woodward (OneNewsNow.com)

minimum wage illustrationA researcher who focuses on labor policies such as worker compensation isn't a fan of a recent executive order from Joe Biden bumping up the hourly wage for federal contract workers.

On Tuesday, President Biden signed an executive order increasing the minimum wage to $15 an hour for federal contractors, providing a pay bump to what the administration calls hundreds of thousands of workers. The purpose, according to the order, is "to promote economy and efficiency in procurement by contracting with sources that adequately compensate their workers."

The administration's argument, as stated in the order, is that raising the minimum wage will result in the following: enhanced worker productivity, higher-quality work, reduced absenteeism and turnover, and lower supervisory and training costs.

Rachel Greszler is a research fellow in economics, budget, and entitlements at The Heritage Foundation. She argues that workers' productivity isn't necessarily tied to an increase in wages.

"The president has claimed that this isn't going to impact taxpayers," she begins. "[He says] they're not going to pay higher prices for government services because somehow those workers are going to become more productive as a result of receiving higher wages."

Greszler

Greszler disputes that argument.

"Just because you guarantee workers higher pay to perform the exact same job, that's not going to make them productive in and of itself," she tells One News Now. "The only way that workers become more productive and eventually earn higher incomes is through technology and gaining education and experience – and experience is exactly the opportunity that is going to be cut off for millions of workers by raising the wage to a level that they are uncapable of producing yet until they get that first job and get their foot in the door."

That's consistent with what the policy researcher wrote in early March, stating that an increase in the minimum wage effectively penalizes companies for employing low-skilled and entry-level workers. "This is because the penalties will take away job opportunities for young Americans to get their foot in the door and gain experience," Greszler wrote.

Pointing to federal data, Greszler says there were around 9,600 full-time federal employees in December that weren't making $15 an hour. These employees would not benefit from the $15 an hour minimum wage for federal contract workers.

The new minimum wage takes effect beginning January 1, 2022.

construction site workersHow many workers affected?

White House officials could not provide an exact figure on how many workers for federal contractors would receive a raise, only that it would be hundreds of thousands. There are an estimated 5 million contract workers in the federal government, according to a posting last year for the Brookings Institution by Paul Light, a public policy professor at New York University.

The increase could be dramatic for workers who earn the current minimum of $10.95 an hour. Those workers would receive a 37% pay hike, though the increase would be rolled out gradually, according to the terms of the order.

The White House said the workers would include cleaning professionals and maintenance workers, nursing assistants who care for veterans, cafeteria workers providing for the military and laborers who build and repair federal infrastructure.

All federal agencies would need to include the higher wage in new contract offerings by Jan. 30 of next year. By March 30, agencies would need to implement the higher wage into new contracts. The increase would also be in existing contracts that are extended.

The wage would be indexed to inflation, so it would automatically increase with each year to reflect changes in prices. The tipped minimum wage of $7.65 an hour for federal contractors would be replaced by the standard minimum by 2024.


The Associated Press contributed to this article.

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