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Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules defines a significant regulatory action as a regulatory action that is likely to result in a rule that may: 1 Have an annual effect on the economy of $100
million or more, or adversely affect in a material way a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities also referred to as economically significant; 2 create serious inconsistency or otherwise interfere with an action taken or planned by another agency; 3
materially alter the budgetary impact of entitlements, grants, user fees or loan programs or the rights and obligations of recipients thereof; or 4 raise novel legal or policy issues arising out of legal mandates, the Presidents priorities, or the principles set forth in the Executive order. OIRA has determined that this proposed rule is economically significant under section 3f of Executive Order 12866.
Executive Order 13563 directs agencies to, among other things, propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs; that it is tailored to impose the least burden on society, consistent with obtaining the regulatory objectives; and that, in choosing among alternative regulatory approaches, the agency has selected those approaches that maximize net benefits. Executive Order 13563 recognizes that some costs and benefits are difficult to quantify and provides that, when appropriate and permitted by law, agencies may consider and discuss qualitatively values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts. The analysis below outlines the impacts that the Department anticipates may result from this proposed rule and was prepared pursuant to the above-mentioned Executive orders.
A. Introduction 1. Background
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This proposed rulemaking implements Executive Order 14026, Increasing the Minimum Wage for Federal Contractors. This Executive order seeks to promote economy and efficiency in Federal procurement by
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increasing the hourly minimum wage paid by the parties that contract with the Federal Government to $15.00 for those workers working on or in connection with a covered Federal contract beginning January 30, 2022. For covered tipped workers, the minimum required cash wage will be $10.50 per hour beginning January 30, 2022, gradually rising to the full Executive Order 14026 minimum wage on January 1, 2024. The Executive order states that raising the minimum wage enhances worker productivity and generates higher-quality work by boosting workers health, morale, and effort;
reducing absenteeism and turnover; and lowering supervisory and training costs.
Executive Order 14026 supersedes Executive Order 13658, which established a lower minimum wage for contractors, to the extent that the orders are inconsistent. Finally, effective January 30, 2022, Executive Order 14026 will revoke Executive Order 13838, which presently exempts contracts entered into with the Federal Government in connection with seasonal recreational services or seasonal recreational equipment rental for the general public on Federal lands from coverage of Executive Order 13658.

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The Department estimated the number of employees who would, as a result of the Executive order and this proposed rule, see an increase in their hourly wage, i.e., affected employees.
The Department estimates there will be 327,300 affected employees in the first year of implementation Table 1.14
During the first 10 years the rule is in effect, average annualized direct employer costs are estimated to be $2.4
million Table 1 assuming a 7 percent real discount rate hereafter, unless otherwise specified, average annualized values will be presented using a 7
percent real discount rate. This estimated annualized cost includes $1.9
million for regulatory familiarization and $538,500 for implementation costs.
Other potential costs are discussed qualitatively.

The direct transfer payments associated with this rule are transfers of income from employers to employees in the form of higher wage rates.15
Estimated average annualized transfer payments are $1.5 billion per year over 10 years. This transfer estimate may be an underestimate because it does not capture workers already earning above $15.00 that may have their wages increased as well. Additionally, employers with Federal contracts may increase wages for their workers who are not working on the contract.
The Department expects that increasing the minimum wage of Federal contract workers will generate several important benefits. However, due to data limitations, these benefits are not monetized. As noted in the Executive order, this rule will promote economy and efficiency. Specifically, this proposed rule discusses benefits from improved government services, increased morale and productivity, reduced turnover, reduced absenteeism, and reduced poverty and income inequality for Federal contract workers.
Executive Order 14026 directs the Department to issue regulations to implement the order and also grants the Department exclusive enforcement authority over the order; the Departments regulations will therefore govern covered contracts. Because Executive Order 14026 also directs the FARC to amend the FAR to provide for inclusion of an implementing contract clause in covered procurement contracts and other agencies to take necessary steps to implement the order, the Department acknowledges that some impacts could be attributed to future rulemaking or other action by other agencies, such as the FARC. However, because such subsequent steps are dependent on the Departments rule and the Departments regulations will govern enforcement of this Executive order, the Department believes it is appropriate to attribute on a shared basis, for effects associated with procurement contracts the impacts discussed in this analysis to this NPRM.

14 The estimate of affected employees represents the number of full-year employees working exclusively on covered contracts.

15 These transfers may ultimately be passed on to the Federal Government and other entities, as discussed in section IV.C.2.c.ii.

2. Summary of Affected Employees, Costs, Transfers, and Benefits
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