The principal legal basis for the new minimum wage is the federal procurement law, which authorizes the president to issue directives for more “economical” and “efficient” federal contracting. Accordingly, Obama’s executive order makes claims about the government savings and efficiencies that would supposedly result from raising the minimum wage. A higher wage “increases [workers’] morale and the productivity and quality of their work, lowers turnover and its accompanying costs, and reduces supervisory costs,” the order says. This would yield “savings and quality improvements” that would improve “economy and efficiency” in government procurement.
This explanation is not credible. No purchaser insists that its suppliers pay workers more in order to lower the cost of goods. To the extent that businesses can deliver better service at lower cost by raising wages, they’ll do so themselves in response to market incentives, and their increased efficiency would result in a lower overall bid price. Moreover, what does the president know about the specific level at which to set minimum wages to optimize suppliers’ performance? Just a year ago, Obama thought $9 was the correct across-the-board minimum wage.
The real reason for the wage order, of course, is the president’s belief that workers deserve a higher wage. In using the procurement power as a pretext, he’s following a practice of his predecessors that the courts have indulged for too long.
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