Joe Biden has signed an executive order forcing federal contractors to pay a minimum wage of $15 an hour as the US president ramps up pressure on businesses to offer higher pay to their employees.

The move on Tuesday comes as the president’s efforts to persuade Congress to pass an increase in the federal minimum wage across the country from $7.25 an hour to $15 an hour have faltered, leading him to seek unilateral solutions.

According to senior administration officials, Biden’s executive order will direct government agencies to require $15 an hour wage payments in all contract solicitations starting in January 2022, implementing them in every contract by March next year. The higher wages will also have to be enshrined in annual contract extensions, and be indexed to inflation.

Biden has made a higher minimum wage a cornerstone of his economic agenda, but failed to secure sufficient support on Capitol Hill to get it passed as part of the $1.9tn stimulus package. Shortly after taking office, he instructed officials to explore imposing a higher minimum wage on federal contractors, leading to Tuesday’s expected announcement.

Many Republicans and some moderate Democrats fear that higher minimum wages would reduce employment by imposing excessive burdens on businesses. But senior Biden administration officials reject such criticism.

“It would not lead to reduced employment . . . but would enhance worker productivity, and then create higher quality work by boosting workers’ health, morale and effort,” one senior administration official said, noting that the proposal had been studied by the White House council of economic advisers. “It would reduce turnover, allowing employers to retain top talent and lower costs associated with recruitment and training sites.”

Federal contractors currently pay at least $10.95 an hour to their workers, following an executive order signed by Barack Obama, the former president. The workers in line for a raise under Biden’s plan are mostly in the service sector, described by the White House as cleaning professionals, maintenance workers, nursing assistants, cafeteria workers and labourers who build and repair federal infrastructure.

The executive order would eliminate the ability of federal contractors to pay a lower minimum wage for workers who rely on tips, which is currently $7.65 an hour.

Biden’s push for higher minimum wages has helped him to endear his economic agenda to labour unions and the left flank of the Democratic party. The US president will have a new opportunity to discuss his support for the policy during his address to Congress on Wednesday.

Some lawmakers have been attempting to find a compromise on Capitol Hill to see if a bump in the federal minimum wage to at least $11 or $12 an hour might be acceptable — many Democrats believe that falls short of what the economy needs, while many Republicans think that increase is a step too far.