Trump Just Cut the Minimum Wage for Hundreds of Thousands of Private Sector Workers

The Trump administration has been making headlines for its attacks on federal workers, but it just opened a new front in its war on workers by scrapping minimum wage protections for hundreds of thousands of employees at private sector companies with government contracts. This latest attack could not have come at a worse time for workers, who are already concerned about rising costs but now face a threat to their livelihood.

On March 14, President Donald Trump issued an executive order undoing a Biden-era regulation that raised the minimum wage for private sector workers on federal contracts to $17.75 per hour. That Biden administration rule raised the wages of hundreds of thousands of workers and helped ensure government contractors paid workers a decent wage. But now, there’s nothing stopping employers from slashing wages. Because of Trump’s new order, corporations working on government contracts are free to cut wages for hundreds of thousands of workers, as the U.S. Department of Labor will no longer enforce the Biden-era rule. An Obama-era rule remains in place, meaning some workers on federal contracts can now be paid a minimum of only $13.30 per hour—a pay cut of up to 25 percent.*

Hundreds of thousands of private sector workers got raises under the now-scrapped Biden rule

The federal government contracts out work to private sector companies to provide goods and services for the public, the military, and the government—from building and maintaining federal offices to providing uniforms for military service members. For a century, the government has been using its contracting system to set a standard to offer market wages and working conditions for private sector workers on federal contracts, while also boosting standards through minimum wages on several occasions.

In 2021, the Biden administration established a regulation that set a higher minimum wage for workers on these contracts, raising the baseline from $10.95 per hour—established under a 2014 regulation—to $15 per hour, adjusted annually to account for inflation. Because wage increases have kept pace with inflation, a private sector worker on a government contract was earning at least $17.75 per hour, more than twice the current federal minimum wage of $7.25 per hour. The boost for workers from the Biden minimum wage increase that the Trump administration just nullified was substantial: 327,300 workers earned a raise, amounting to an average wage increase of $5,228 per year. Not only were these workers previously earning wages below $15 an hour, but they were also disproportionately workers without a college degree.

Notably, during President Trump’s first term in office, he refused to increase the contractor minimum wage and rolled back the minimum wage for workers providing recreational services on federal lands. But now, he is repealing the $17.75 minimum altogether.

Trump’s new order leaves workers vulnerable to wage cuts

While other wage protections for workers on federal contracts exist, too often, they are inadequate for protecting the workers who just saw their minimum wage taken away.

The Service Contract Act (SCA) establishes minimum prevailing wage standards for workers on federal service contracts, and the Davis-Bacon Act (DBA) does the same for workers on federal construction projects. The market wages established under these laws can be much lower than the $17.75 standard eliminated by the Trump administration, and they are not updated frequently enough to keep up with inflation. For example, a nursing assistant on a federal contract in Lancaster County, Pennsylvania, has a minimum wage of only $13.17; a food service worker in parts of Mississippi, Tennessee, and Arkansas has a minimum wage of $12.06; and a landscape laborer on a construction site in Grand Rapids, Michigan, has a minimum wage of just $10.47. All these workers could see drastic pay cuts down to the $13.30 minimum wage.

SCA and DBA standards also exclude many workers covered by the Biden-era standard, such as concessions workers at national parks, whose new minimum wage is at most $13.30 per hour. The Obama-era $13.30 minimum wage also excludes workers in Puerto Rico, such as the ones making uniforms for the U.S. military, who now have no standard aside from Puerto Rico’s $10.50 minimum wage. Revoking the minimum wage creates chaos for contractors trying to determine which new minimum applies and what wages they need to pay.

Conclusion

The Trump administration claims its new policy of lower wages for working-class people will help “restore common sense to the Federal Government and unleash the potential of American citizens.” However, after weeks of targeting federal workers with layoffs and threatening to drive up prices with a chaotic approach to tariffs, the administration’s latest move simply gives thousands of corporations in the private sector free reign to rip off their employees. And it’s not President Trump’s only move to cut the pay of and reduce job quality for private sector workers: At the same time Trump eliminated the contractor minimum wage, he also repealed other Biden-era executive orders that expanded access and promoted good value on federally supported infrastructure investments.

Trump may claim that his policies will put American workers first, but his administration’s actions make it hard for workers to benefit.

* Author’s note: While the Obama-era rule remains in place, the Department of Labor still needs to issue guidance on how it will enforce the older wage standard.