Beginning Jan. 30, 2022, the standard minimum wage for federal contractors will be $15 per hour, effectively raising the minimum wage for federal contractors by $4.05, according to the U.S. Department of Labor's proposed rule.
"And beginning Jan. 1, 2023, the secretary of labor will determine the minimum wage on an annual basis based on the consumer price index at least 90 days before any new minimum wage is to take effect," the labor department said.
The proposed rule, posted July 22 on the Federal Register, is in compliance with President Joe Biden's April 21 executive order that made changes to a previous presidential directive.
Under Biden executive order, the minimum wage increase applies to new contracts, new contract-like instruments, new solicitations and extensions or renewals of existing contracts across the United States including the territories.
Citing a 2019 study by the Congressional Budget Office, the labor department estimates that a $15 per hour minimum wage implemented by 2025 could raise earnings for 27 million workers, 17 million of whom would have their rate increased to the new minimum wage and 10 million of whom may receive spillover effects.
"Increasing the wage less, such as $12 an hour or $10 an hour over the same time frame has commensurately smaller impacts on earnings," the department said.
The labor department said expects the quality of government services to improve when the minimum wage of federal contract workers is raised.
"In some cases, higher-paying contractors may be able to attract higher quality workers who are able to provide higher quality services, thereby improving the experience of citizens who engage with these government contractors," the proposed rule stated.
"Raises in the minimum wage have been shown to reduce the level of poverty among the entire population, and specifically among children, within high impact areas."
The department will accept public comments until Aug. 23.