President Obama used his executive authority to raise the minimum wage for federal contract workers on Wednesday

This article is more than 6 years old

This article is more than 6 years old

President Obama used his executive authority to raise the minimum wage for federal contract workers on Wednesday, declaring: “In the richest nation on earth, nobody who works full-time should have to live in poverty.”

At a signing ceremony in the East Room of the White House, Obama urged states, businesses and members of Congress to follow his lead.

The executive order raises the minimum wage for federal contract workers to $10.10 an hour.

The increase will not come into force until January next year, when the order takes effect for all new contracts and replacements for old contracts.

The White House estimates the increase will only affect a few hundred thousand people working in national parks, or as cleaners or kitchen workers for federal agencies.

A bill before Congress, introduced by senator Tom Harkin and congressman George Miller, both Democrats, would potentially increase the wages of almost 28 million workers.

Obama said the current federal minimum wage of $7.25 was “20% less than when Reagan was in office” and declining, in real terms, each year as inflation rises.

He first pledged to increase the minimum wage for employees on federal contracts during last month’s State of the Union address. “I said this year would be the year of action,” Obama said. “And I meant it.”

White House officials privately concede that Obama’s executive actions are limited, particularly when compared to what might have be achieved through ambitious legislative action. The chances of the Harkin-Miller bill passing are extremely low.

But the White House hopes it will incentivise states to raise their own minimum wage levels.

Democrats also hope to make wage increases – an issue that polls show has wide appeal across the political spectrum – a central campaign issue in the run-up to November’s midterm elections.

The executive order also includes provisions to make sure that tipped workers earn at least $10.10 overall, through a combination of tips and an employer contribution.

During his remarks, Obama was flanked by minimum-wage workers and union campaigners, as well as his labor secretary, Tom Perez.

Speaking in advance of the ceremony, Jerome Hardy, 52, a father of one who serves food at the Pentagon Courtyard Café, where he has made $9 an hour for the past eight years, said he would use the extra money to see a dentist and pay off some of his credit card bills.

“I know $10.10 is not a fortune, but I have waited eight years without a raise. I get a new contract every year, so I will get it [the raise] next year,” he said. “I’m going to get my teeth fixed and I will pay off some of my credit card debt.”

Hardy, who lives with his parents because he makes so little in his job, and who featured in the Guardian’s series A Day’s Work, has taken part in a strike to highlight the low pay of federal contractors.

Hardy has served military leaders at the Pentagon, and said he will continue to take action for better working conditions. “We need sick leave and health benefits. For eight years, I’ve never taken a vacation, because I don’t get paid.”

Robert Day, 45, who was also on stage with the president, will see his wages increase by between between $15 and $17 a week. He currently earns $9.54 an hour at sandwich outlet Potbelly’s, at Union station, a federally owned property in Washington DC. “I appreciate it,” he said of the impending raise. “It all helps.”

Some rightwing economists say that an increase to the federal minimum wage – particularly one that is too high – will force employers to lose staff to cut costs.

However, liberal analysts say the risk to unemployment is overstated, and most companies will make modest adjustments to pay their staff slightly more.

“Boosting wages will lower turnover and absenteeism and increase morale and productivity overall,” the White House said in a statement. “Raising wages for those at the bottom will improve the quality and efficiency of services provided to the government.”