Next week, federal contractors will start paying workers at least $15 an hour.Wages will rise to 390,000 federal contractors, about half of whom were black or Hispanic (see Table 1).new rule The U.S. Department of Labor will also phase out minimum wages for tipped workers on federal contracts and continue to raise federal contract minimum wages based on inflation.

The new minimum wage will also improve the efficiency of the federal contracting system by reducing worker turnover and increasing the productivity of the workforce.As workers take their jobs more seriously after the minimum wage increase, they are more likely to stay in their current jobs and be more productive, as a recent study of a large U.S. retail company showed illustration. As another example, research shows that increasing employee retention after a minimum wage increase leads to increased productivity nursing home, fewer inspection violations and lower resident mortality rates.

In addition to boosting earnings for hundreds of thousands of federal contractors, the new minimum wage will help boost wages across the labor market. Higher contractor wages will incentivize other companies in the local labor market to raise wages to recruit and retain workers who can now earn higher wages. For example, Amazon’s $15 starting salary, Increase other low-paying occupations. As companies complete contracts and leave the federal contracting system, they are more likely to keep wages above the new, higher minimum wage.For example, Conrad Miller show Federal affirmative action requirements have increased the proportion of black company employees with contracts even after they were no longer federal contractors.

While the new federal contractual minimum wage will broadly share benefits, it will not replace an economy-wide federal $15 minimum wageMore than a dozen years have passed since the last federal minimum wage hike: Congress should do its job and raise the minimum wage.