In April 2021, the White House released an executive order to bump the minimum wage to $15 per hour for all workers employed by federal contractors. This decision seems prescient as inflation and the cost of living hammer low-income workers.
Despite the executive order, which resulted in more than 4.1 million Americans getting a wage increase, many federal workers still struggle to pay for basics like food, shelter and healthcare. This is a problem all across America, including in my city of Alexandria, Virginia, which is a stone’s throw from the nation’s capital.
Today, the federal contract workers, who are arguably struggling the most, are employed by companies operating under the Service Contract Act (SCA). These “blended federal workforce” service employees typically consist of individuals from low-income communities — often women of color — performing work such as housekeeping for government facilities. These folks are not well-compensated contractors working for the military or consulting industries. Instead, these are the essential workers who keep our government functioning.
Although President Biden’s recent minimum wage increase put more money in the pockets of the more junior employees, it did not benefit the more senior workers with longer tenure and experience. As a result, those with 10 years of experience are paid the same as those with only one or two years of experience. This workplace phenomenon is known as wage compression. For some of these workers, it has led to their striking and demanding better salaries and benefits.
Ultimately, this issue is about fairness.
Because many SCA contracts were signed before President Biden’s federal minimum wage increase, the SCA does not address wage compression. Therefore, to raise salaries and increase benefits for all of their employees, especially the more experienced workers, the contracting companies must cut their own revenues. But this is not fair to the companies implementing these projects because it reduces the profits the SCA contract promised they would earn.
Of course, additional executive orders from the White House could mandate employers pay more. But a new president could overturn those executive orders, increasing unpredictability for employers and workers.
This is fixable.
I am urging lawmakers on Capitol Hill to consider drafting legislation to create a formal process allowing companies within the SCA to apply for more federal dollars that could only be used for employee compensation and benefits. Again, the corporations complying with the SCA would not be entitled to additional profits but only more money to ensure their workforce is compensated fairly.
I believe that congressional reform of the SCA is also in the best interest of Americans because if a federal contract worker — for example, at a call center for seniors with questions about a program like Social Security or veterans benefits — is underpaid, overworked and understandably becomes resentful, it is the taxpayer who may receive less reliable customer service. Anyone who has ever earned a salary understands that workers respond positively to being compensated fairly or negatively to being underappreciated.
In the name of fairness, I hope Congress will pass legislation to modernize the SCA. Only then will Biden’s executive order to raise the minimum wage for federal government contract workers benefit new and tenured employees, all of whom deserve to be rewarded for their commitment to public service.
