Obama to Bypass Congress, Raise Minimum Wage for Federal Contracts on His Own

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Senior Entrepreneurship Writer at CNBC
3 min read

President Obama knows he is on shaky ground with the American public right now as much of his second term has been spent with Washington in a partisan logjam. And so the in his State of the Union address tonight, Obama plans to make an aggressive move -- completely circumventing Congress -- to remind Washington and the American public that he is willing and able to use his executive authority when push comes to shove.

Obama will announce an executive order that raises the minimum wage for those working on any new federal contracts to $10.10 an hour, according to a fact sheet released by the White House Tuesday morning. The federal minimum wage currently sits at $7.25 per hour and has not been raised for seven years. A full-time minimum wage worker makes $14,500 a year.

Related: What Really Motivates a Small Business to Hire? (Infographic)

Federal contract workers include the likes of janitors for federal property, construction workers and military base workers who wash dishes, serve food and do laundry. Obama will make the announcement in his highly anticipated State of the Union address Tuesday night, which begins at 9 p.m. EST.

Businesses who do work for Uncle Sam will have to price the wage increase into all of their contract bids going forward, the White House says.

Obama wants to raise the federal minimum wage to $10.10 across the board -- for all employees, not just those who are working for Uncle Sam -- and have it indexed for inflation thereafter, but he needs Congress to do that. Obama can, however, raise the minimum wage for all new federal contracts with his executive power.

Related: Obama Picks Maria Contreras-Sweet to Lead the SBA

Raising the minimum wage is a highly contentious issue for business owners, especially franchise owners, who employ countless numbers of minimum wage employees. “Entry-level jobs are critical for people to gain the skills necessary to move up the economic ladder and a higher minimum wage only serves to put those jobs in jeopardy," said International Franchise Association President and CEO Steve Caldeira in a statement of policy objectives released ahead of the State of the Union address Tuesday.

Aside from the wage wars, the White House has hinted that this may not be the last time Obama bypasses Congress.

“Mindful of Congress’s reluctance to be cooperative at times, the President is going to exercise his authority,” said White House spokesperson Jay Carney on Monday. “The president has embraced the idea in the past that he can use his authority as president and the powers available to the president to advance his agenda on behalf of the American people.  What we have said is that he views 2014 as a year of action and that he has tasked his team to come up with new ways in which we can -- he can -- advance that agenda.”

Related: What Franchisees Could Lose If the Minimum Wage Is Raised

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