Photo: White House
President Obama’s plan to raise the minimum wage for federal contractors from $7.25 an hour to $10.10 cents an hour could have more of a long-term rather than a short-term effect in Indiana.
Obama will announce at his State of the Union address tonight that he is signing an executive order to raise the minimum wage on new and renewed federal contracts.
The increase would apply to a handful of low-wage workers such as those employed by janitorial and laundry services or construction companies. A total of 16,000 federal contract employees are paid minimum wage.
One of the reasons for the low number of low-wage workers is the U.S. Department of Labor already has some rules in place regarding how much federal contractors must be paid. The Labor Department’s “wage determinations” considers what the average wage is for a certain type of worker in their county and requires employers to abide by the determined wage.
Indiana Business Research Center Economist Tim Slaper says although the move won’t affect many Hoosiers, it could be seen as a test run for how an across-the-board increase of the $7.25 per hour federal minimum wage, which Indiana also uses, could affect workers and their employers.
“I think this could provide a set of data that could address the question once and for all,” Slaper says.
Slaper says until now, the research has been largely divided—with some studies showing a wage increase would have little effect on workers’ quality of life and put a major financial burden on businesses and other studies showing the exact opposite.
However, the few it does affect could see a more significant impact because of the state’s lower cost of living.
“It’s going to be a bigger boost if you will for the individual worker,” he says. “It’s going to be a bigger hit for the business person who’s hired them because $10 an hour in New York City or Washington D.C. is a lot different than $10 an hour in Loogootee.”
The rate increase would likely only affect a few hundred workers in Indiana because most defense contractors like management and technology firm Raydar Inc. in Odon pay well above the minimum wage.
Raydar President Ray Darnell he is more concerned the plan is a signal the government is getting too involved in contractors’ businesses.
“I don’t want anyone making minimum wage but I also don’t want the government mandating what salaries can be. I don’t think the government has the first idea of how to run a business,” he says.