Labor Department officials have rejected requests to exempt fast food concessions on military bases from regulations that will raise the minimum wage to $10.10 for all workers on federal construction and service contracts.
The rule is scheduled to be published Oct. 7, implementing an executive order that will take effect in January for all new and renegotiated contracts. It applies to other contracts on military bases as well, such as contracts in clubs.
The wage hike will certainly benefit workers, many of whom are military family members and veterans. But concerns have been raised that the increased cost — about 40 percent — would lead to closures of fast food concessions on installations, with a loss of jobs, especially on Navy and Marine Corps bases. Most fast food restaurants on Army and Air Force bases are operated directly by employees of the Army and Air Force Exchange Service, not under contract as concessions.
Labor Department officials acknowledged that concerns were raised that increasing the minimum wage would impose a "uniquely burdensome obligation" on fast food restaurants on military bases. Among other things, the price of products sold on military bases cannot be raised above the prices offered by competitors within a three-mile radius. And contractors generally pay rent and a portion of their sales in exchange for the ability to operate on military bases. Part of the profits are used to support morale, welfare and recreation programs.
However, Labor officials state, such comments "fail to account for a number of factors [the Labor Department] anticipates will substantially offset many potential adverse economic effects on their businesses."
For example, Labor officials contend that increasing the minimum wage will lower employee absenteeism and turnover, improve workforce morale and productivity, reduce supervisory costs and increase the quality of services provided.
"These commenters similarly do not account for the potential that increased efficiency and quality of services will attract more customers and result in increased sales," Labor officials stated in their rule.
President Obama signed an executive order Feb. 12 to raise the minimum wage for all workers on federal construction and service contracts. The order doesn't take effect until Jan. 1, and affects new contracts and renegotiated contracts.
Shortly after the order was signed, Navy Exchange Service Command officials announced that four restaurants on Navy installations, including three McDonald's outlets would be closing. The McDonald's outlets came to the end of their contract term and officials were in the process of renegotiating those contracts when McDonald's decided to shut them down, NEXCOM officials said.
In an April 8 letter to the Labor Department, Russell Beland, deputy assistant secretary of the Navy for military manpower and personnel, said that unless an exemption was granted, up to 390 fast food concession operations would close on military installations across the U.S. and its territories, with a loss of nearly 5,750 jobs, many held by military family members and veterans.
It remains to be seen whether new contracts will allow restaurants on military bases to raise their food prices to compensate for the increase in the minimum wage.
Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.
