The Obama administration on Tuesday issued regulations requiring companies that do business with the federal government to pay their workers at least $10.10 an hour.
A final rule unveiled by the Labor Department comes at the direction of President Obama, who signed an executive order in February commanding the pay hike in lieu of congressional action to raise the national minimum wage.
“By raising the minimum wage for workers on federal contracts, we’re rewarding a hard day’s work with fair pay,” Labor Secretary Thomas Perez said.
The 338-page rule will take effect on Jan. 1, and would apply to roughly 24,000 businesses with federal contracts, employing about 28 million workers, according to Labor Department figures.
Most contractors already earn at least $10.10 an hour, however. Roughly 200,000 workers stand to benefit directly from the regulations, according to administration estimates.
The new standard, which will be adjusted for inflation, applies to construction projects, as well as the production of “food, lodging, automobile fuel, souvenirs, newspaper stands and recreational equipment.”
The rule also covers contracts involving services, ranging from dry cleaning to child care.
Under the regulations, employers — and taxpayers — will have to shell out an additional $500 million to workers, the agency’s cost-benefit analysis concluded. However, the Labor Department contends that the added costs will be offset by increased productivity, reduced turnover and benefits to the companies.
“Overall, the Department believes that the combined benefits to employers and the Federal Government justify the costs that would be incurred,” the rule states.
The administration predicts broader economic benefits from the regulations, a cornerstone of Obama’s pay-equality initiative.
“This action will also benefit taxpayers,” Perez said. “Boosting wages lowers turnover and increases morale, and will lead to higher productivity.”