On March 14, President Trump rescinded Executive Order 14026, which increased the minimum wage for federal contractors to $15 per hour. The original executive order was signed by President Biden on April 27, 2021, and the updated minimum wage level has been in effect since January 20, 2022. The rule also directed the U.S. Secretary of Labor to make updates to the minimum wage for federal contractors going forward, in order to keep pace with inflation. The current minimum wage for federal contractors, as of January 1, 2025, is $17.75.
In order to raise the federal minimum wage for all workers, Congress would need to pass a law, but the Department of Labor has the authority to set a higher standard specifically for federal contractors. Federal contractors are private companies or nonprofits that make products or provide services for the government. Federal contractors include workers in a wide range of industries and at many different levels of pay, ranging from the janitors who clean government buildings to the information technology workers who run government systems to the food service workers on military bases. In 2021, EPI estimated that there would be roughly 1.9 million federal contract jobs in 2022, including construction workers. Of those, about 390,000 would have their wages raised by the directive in EO 14026, or about one-fifth of the full federal contract workforce. EPI’s also estimated that these workers would see an estimated total pay increase of $1.2 billion.
A higher minimum wage for federal contractors helps ensure that taxpayer dollars incentivize good jobs, rather than low-wage jobs where contractors compete with each other in a race to the bottom. A higher federal contractor wage standard is good for employers and the federal government overall. In particular, minimum wage increases lead to reductions in turnover and worker separations. High worker turnover can be incredibly expensive for firms that employ people at low wages. Reducing worker turnover could improve the efficiency of the government contracting system. The quality of federal contract work could also improve with a higher minimum wage. A 2021 study by Krista Ruffini found direct evidence that minimum wage increases at nursing homes improved worker performance and production efficiency, and that inspection violations, preventable health conditions, and resident mortality all fell in response to minimum wage increases.
Impact: Overturning the current law established by this EO will take away pay increases from about 390,000 low-wage federal contract workers who earned the right to at least $15/hour under this regulation. If the Trump administration fully overturns this rule, federal contractors would revert to the minimum wage level last set for them by the Obama administration a decade ago in 2014, of $13.30 an hour. Alternatively, If the Trump administration were to rewrite the rule to do away with the higher minimum wage for federal contractors entirely, federal contractors in states that don’t have a higher minimum wage would face the current federal minimum wage of just $7.25 per hour.