A crystal clear example of the Trump administration's false populism.

They're cutting the pay of low-wage workers.

I’ve been meaning to write about this but Axios beat me to it.

A little-noticed Trump administration move will decrease the minimum wage for federal contractors, rolling back a boost that helped hundreds of thousands of workers…The Labor Department yesterday said it would no longer enforce the $17.75 per hour minimum wage for federal contractors set in an executive order from President Biden.

This action is deserving of big, not “little” notice (to their credit, many other media venues had this too). Not solely because it will lead to lower earnings for a sub-group of low-wage workers, but because of what it shows about who they’re fighting for, versus who they say they’re fighting for.

I’m well aware that it’s hardly newsworthy to point out that the admin’s alleged populism is BS, but it’s not that often you get such a clear, unequivocal signal. More often, the signal is a bit more nuanced, like kicking pro-labor folks off the National Labor Relations Board, a move that hurts labor organizing, but takes some explaining.

This one, however, is clear as day. Who here thinks America’s big problem right now is that we pay low-wage workers too much? The only reason to rescind this Biden EO—which CEA helped with, along with many others, especially at the Labor Dept.—is as a gift to contractors at the expense of their workers.

A significant share, about 20% of the workforce, works on federal contracts, and with DOGE’s privatization efforts, that share could grow. But that share includes all wage levels. The incomparable and data-rigorous Economic Policy Institute tells us that the recission will cut pay for around 390,000 workers.

Meanwhile, we’ve got the Rs in Congress planning to cut Medicaid—health coverage for low-income families—to offset the cost of their top-heavy tax cuts.

What’s happening with the federal minimum wage? A lot of nothing. As the figure shows, its nominal value of $7.25 hasn’t been adjusted for 15 years (the longest stretch on record), and in real terms (in today’s $’s), it’s down by half since it’s late 1960’s peak and is at its lowest buying-power level since before even I was born.

In one relevant way, the picture is better than this looks. First, 30 states (plus DC) and almost 70 localities have moved on their own to raise their minimum wage above that of the federal government. (Importantly, it’s though all this sub-national variation that lots of research has found—summarizing a huge lit—that in the vast majority of cases, the benefits of the increases outweigh the costs, e.g., reduced employment.) Second, as the overall wage level rises, fewer workers are affected by the stagnant minimum wage floor, even in the states/localities that haven’t moved up on their own.

In fact, if we look at the BLS-produced number of workers at or below the fed min, it dipped below 1 million for the first time in ’23, the most recent data.

But, of course, were the Congress to raise the minimum to recently proposed levels of around $15 and higher, millions of workers in states still on the federal minimum—geographically, at this point in time the federal minimum wage is more like a southern US minimum wage—would get a wage bump.

Wouldn’t that be inflationary? It’s a fair question, and it depends on how many low-wage workers would be in the sweep (between the old and new, higher wage floor). Minimum wage hikes get absorbed by the three p’s: prices, profits, productivity. The latter is especially interesting. From the EPI link above re the Trump recission (my bold):

…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. 

But my point here is not to litigate those questions. It’s to offer up a crystal clear example of who’s fighting for working-class people, and in this case, who isn’t.