It's clear we're in for wall-to-wall class warfare during tonight's State of the Union, disguised of course as an effort by Democrats to address "income inequality." There are a few class warfare tactics Democrats think are always political winners, and one is raising the minimum wage. Tonight, the White House has announced, Obama will raise the stakes by bypassing Congress and announcing an executive order by which he will raise the minimum wage to $10.10 (from the current $7.25) for federal contractors.
The White House said Obama would announce he is issuing an executive order to raise the minimum wage to $10.10 an hour for federal contract workers with new contracts.
In his address, Obama will also call on Congress to pass a bill that would increase the federal minimum wage for all workers to $10.10 an hour from $7.25 and index that to inflation going forward.
The executive order for new contracts or existing contracts in which terms are being changed would take effect at the beginning of next year, with janitors and constructionworkers among the beneficiaries. Issuing the order allows Obama to bypass Congress in a limited way, with Republicans opposed to a broad increase in the minimum wage.
White House officials said Obama would also announce new executive actions on retirement security and job training to help middle-class workers expand economic opportunity.
"In this year of action, the president will seek out as many opportunities as possible to work with Congress in a bipartisan way. But when American jobs and livelihoods depend on getting something done, he will not wait for Congress," Obama senior adviser Dan Pfeiffer said in an email to supporters sketching out the themes of the speech.
Liberals will defend this as within the president's prerogative in managing the business of the executive branch, since he is merely establishing a benchmark contractors have to meet if the want to do business with the federal government. And in a strict sense, that's correct, which is why he has the authority to do it.
But as a matter of policy, there are several problems with it. First, because the federal government is so enormous, the number of workers employed by federal contractors represents a disproportionate share of the overall workforce. In 2008, the Congressional Research Service said that 10 million American workers work for federal contractors. Not that they're all making minimum wage, but when you raise the wage scale at every one of those companies, you're putting a lot of pressure on the rest of the labor market. The more the federal government spends, the more it controls the dynamics of the market and the more power it has to essentially set the terms for how the rest of the market will operate.
If the federal goverment was relatively small, then an executive order like this would represent a mere internal administrative standard. When the federal government is enormous, you've not only raised the minimum wage for the 10 million people who work for these companies but for those at every company that wants to be a federal contractor. Because without paying that $10.10 an hour, those companies won't even be considered for federal contracts.
This is one of the ways Obama is seizing more and more power away from Congress. The more you expand the reach of the federal government into the private economy, the more power the president can exercise by executive fiat. And ironically, he's doing it through privatization of services, which has traditionally been an idea popular with conservatives.
The other problem here, of course, is that mandating higher wages from federal contractors means it will cost taxpayers more to let out these contracts. When a contractor's cost of doing business goes up, the contractor's clients will pay more. That will affect not only the federal government but every private company these contractors do business with as well.
And Obama did all this, without the approval of Congress, because he needed a look-what-I-did moment in his State of the Union address.
Unfortunately, Obama may get the political benefit he's looking for because Republicans are astonishingly ineffective when it comes to talking about minimum wage policy. I will address that in another column later today.
