Report: Requiring Federal Contractors to Pay $ 15 Minimum Wage Will Have ‘Minor’ Impact on Government Spending
President Biden’s executive order requiring a minimum wage of $ 15 for federally contracted workers from next year will have a “minor” impact on government contract spending of $ 1 billion to $ 2 billion per year, according to a new one. report.
“The [April 27] The decree will have a minor impact on overall contract spending, ”said the Censeo Consulting Group analysis published on Wednesday. “In fiscal 2019, the federal government spent approximately $ 597 billion on goods and services, supporting an entrepreneurial workforce of approximately 5 million people. About 14% of this workforce (695,000 people) have job classifications whose hourly rates may be affected by the decree. ”
These hourly paid people worked on contracts that accounted for just 3% of the government’s overall contract spending for fiscal 2019, or $ 20.6 billion. “And, since many people backing these contracts are currently receiving salaries above $ 15 / hour, Censeo estimates that only 5% to 10% of that potential expense would ultimately be affected by EO,” the report said. “As such, the total impact on federal spending is likely to be between $ 1 billion and $ 2 billion” annually.
Censeo noted that this “generally matches” the Institute for Economic Policy’s cost estimate. The consulting firm used data from the departments of commerce and labor, general service administration, the rewards management system and USAspending.gov as well as interviews with relevant experts for its analysis.
In terms of location, federal contract workers in the Southern and Midwestern states are the most likely to be affected by the order. In addition, rural areas compared to urban areas will be more likely to be affected.
Censeo projected that the types of jobs and the number of contracts likely to be affected are: janitorial services (10,636 contracts), landscaping services (5,400), nursing services (3,663), administrative office (3017), catering services (1852). , dry cleaning and laundry services (1,058) and other items (4,894). The total number of contracts that could be affected is 30,520, the firm said.
The graph below shows which agencies mainly hold potentially affected contracts and the costs.
“Our analysis suggests that this will be a medium complexity contract change that will need to occur,” said Curt Cote, Managing Director of Censeo. Censeo predicts that tens of thousands of contract expenses will need to be reviewed for compliance with the ordinance and amended, which will add a total of 450,000 hours to the workload of contracting officers and equates to more than 240 employees. fulltime.
“Agencies need to figure out” how to handle “this upcoming work rush,” such as whether or not they will bring in additional staff to help, Cote said. Censeo recommended that agencies be proactive in planning for implementation and listed specific steps to do so in the report.
When Biden first announced in January that this executive order was coming, Jaime Contreras, vice president of 32BJ SEIU, the largest union of real estate workers in the country, which has 1,000 federally contracted janitors and security guards. in the Washington, DC and New York area, said the president was “not only helping to lift communities out of poverty and improve living conditions, but he also made working families better support businesses. communities, stimulate our economy, and alleviate overburdened state and federal programs.
Censeo said the wider economic impact of the decree was beyond his analysis.
The executive order builds on President Obama’s February 2014 executive order that required federal contractors to pay their workers $ 10.10 per hour. Currently, the minimum wage for federally contracted workers is $ 10.95 per hour and the tip minimum wage is $ 7.65 per hour.
A White House official said Government executive, “We believe that the increase in the minimum wage will have a major impact on the lives of the hundreds of thousands of affected workers.”
For example, “A full-time worker who currently earns the minimum of $ 10.95 an hour could earn more than $ 8,000 [extra] during the year. They could put down a down payment on a house, send a child to daycare, or just put food on the table so they only have to work one job. “
Additionally, the decree “will have impacts beyond federal contracts, as competitors in the same labor markets as federal contractors may also raise wages as they seek to compete for workers,” the Minister said. responsible. “Employers may seek to increase the wages of workers who earn more than $ 15 while trying to recruit and retain talent.”
In addition, “Research shows that when the minimum wage is increased for workers, the workers who benefit from it spend more, a dynamic that can help boost local economies,” the official said. “Raising the wages of workers can reduce racial and gender inequalities based on income. So we think the presidential decree is a big deal.
Earlier this month, Government executive reported on how the upcoming rulemaking process will show the full breadth and scope of the decree.