Currently the federal minimum wage is $7.25/hour. President Obama will issue an executive order to raise that to $10.10/hour for all federal contractors. Meaning that, going forward, if you want a contract from the federal government you’ll need to pay every employee at least $10.10 an hour.
The action will cover all workers employed under future government contracts, ensuring that none is paid less than $10.10 an hour. In a fact sheet announcing the action, the White House highlighted several occupations that will be helped by the move, including kitchen and laundry workers on military bases, as well as janitors at federal buildings and construction workers at government building sites.
“The President has embraced the idea in the past that he can use his authority as President and the powers available to the President to advance his agenda on behalf of the American people,” White House Press Secretary Jay Carney said at his briefing on Monday. “What we have said is that he views 2014 as a year of action and that he has tasked his team to come up with new ways in which we can – he can – advance that agenda.”
Does President Obama really have the authority to do this? I think so. The problem is this order inflates the cost of every new federal contract across the board, meaning Congress has to either budget more money to pay for those contracts or reduce the amount of money being spent.
Which of those do you think is more likely? Right. This pay raise Obama just handed out is coming out of your pocket. Which is an unintended illustration of what minimum wage opponents have been saying about this sort of policy for years. It inflates costs without adding any value. Of course, with the federal government running deficits the way it does, nobody is going to be feeling any immediate costs. Which is a big difference between this minimum wage hike, and a minimum wage hike applied to the private sector.
The federal government can deficit spend with impunity. Inflating the prices of contracts is no big deal, because the cost burden can be dumped on future taxpayers by adding it to the national debt. Business owners don’t have that option (not that it’s an ethical option to begin with). Instead, they’re forced to either cut overhead (read: fire some people) or raise prices for their customers.
The government isn’t run in such a fiscally responsible manner. But hey, no big deal right? We’re only $17.33 trillion dollars in debt.