THIS week President Barack Obama announced a new rule that could potentially give millions of hardworking Americans a raise.
On Tuesday, June 30, the White House began releasing the details of a long-awaited overtime rule aimed at lifting wages for up to five million people as soon as 2016, according to sources familiar with the plans.
Obama formally announced the plan on Thursday, July 2 during a trip to La Crosse, Wis., where he spoke about labor issues and the economy.
The President’s proposal would more than double the salary level under which virtually all workers qualify for overtime pay whenever they work more than 40 hours in any given week. That threshold, now $23,660, would rise to $50,440—a dollar amount Obama’s administration believes would encompass many workers who are classified as managers—and would increase automatically in future years.
“America has always done better economically when we’re all in it together, when everybody gets a fair shot,” he said to a crowd of hundreds at the University of Wisconsin-LaCrosse, where he made his case for economic policies he hopes to implement before the end of his term.
Officials say the new overtime changes would cover about 40 percent of the nation’s full-time salaried workforce, and could add as much as $1.3 billion nationwide to workers’ pockets. In California, at least 420,000 could become eligible.
“In this country, a hard day’s work deserves a fair day’s pay,” Obama wrote in an op-ed published in the Huffington Post. “That’s at the heart of what it means to be middle class in America.”
“Right now, too many Americans are working long days for less pay than they deserve,” Obama continued. “That’s partly because we’ve failed to update overtime regulations for years–and an exemption meant for highly paid, white-collar employees now leaves out workers making as little as $23,660 a year—no matter how many hours they work.”
The proposed changes would more than double the salary threshold for overtime eligibility to $970 a week in 2016. That means employees who earn a yearly salary of $50,440 or less automatically would be eligible for overtime pay. The current national threshold—last updated in 2004—is roughly $455 a week, meaning a salaried worker making more than $23,660 a year does not automatically qualify for overtime pay under federal standards.
The Chamber of Commerce, a major White House ally in the recent trade fight, is deeply opposed to the idea, saying it would hurt small businesses. Randy Johnson, senior vice president of Labor, Immigration and Employee Benefits called the rule “another example of the administration being completely divorced from reality and adding more burdens to employers and expecting them to just absorb the impact.”
The National Retail Federation said that few workers would actually see bigger paychecks. “There simply isn’t any magic pot of money that lets employers pay more just because the government says so,” said David Frenchon, NRF senior vice president for government relations.
A recent report by the NRF said that employers were much more likely to cut wages and bonuses or reduce hours to avoid paying overtime. “If employers made no changes to their pay and scheduling structure, an option the NRF acknowledged is highly unlikely, overtime costs would run businesses $9.5 billion under the proposed changes,” the report said.
The new threshold would not be indexed to overall price or wage increases, as many progressives had hoped. Instead, it would be linked permanently to the 40th percentile of income, setting it at the level when the overtime rule was first created under President Franklin D. Roosevelt through the Fair Labor Standards Act of 1938.
“Without Congress, I’m very hard-pressed to think of a policy change that would potentially reach more middle-class earners than this one,” said Jared Bernstein, a former economic adviser to Vice President Joe Biden, now a senior fellow at the Center on Budget and Policy Priorities.
US Labor Secretary Thomas Perez told reporters that too often managers are falling behind and getting caught in the “middle-class squeeze.” Setting a “bright line” with an updated salary limit will help to re-classify hourly employees, who must always be paid overtime, as salaried “managers,” regardless of if they make as little as $25,000 a year.
“It doesn’t matter if what you do is mostly physical work like stocking shelves,” Obama said. “It doesn’t matter if you’re working 50 or 60 or 70 hours a week – your employer doesn’t have to pay you a single extra dime.”
Facing increasing pressure, the Obama administration expects the overtime rule to be challenged in court, and will press to complete by 2016 the review process during which comments are submitted by the public, and then considered by the Labor Department and the White House as it prepares the final rule. If everything goes according to plan, the rule will go into effect before Obama leaves office.
The President’s recent trip to Wisconsin was intended to discuss the “plan to extend overtime protections to nearly 5 million workers in 2016, covering all salaried workers making up to about $50,400 next year. That’s good for workers who want fair pay, and it’s good for business owners who are already paying their employees what they deserve—since those who are doing right by their employees are undercut by competitors who aren’t,” Obama wrote in his op-ed.
His speech Thursday took a critical focus on Middle Class Economics.
The regulation would be the most sweeping policy undertaken by the president to help the middle class, and the most ambitious intervention in the wage economy in at least a decade. Administration aides warn that it wouldn’t always lead to wages going up, however, because in many instances employers would cut back employee hours worked rather than pay the required time-and-a-half. Even so, they said, additional hires needed to make up for that time could also spur job growth, and give existing workers either more time with their families or more opportunities to work second jobs and put more money in their pockets.
Former Communications Workers of America president Larry Cohen called the rule a “good step forward,” but warned, “we need to do much deeper things about how U.S. workers participate in the world economy and what rights they have at home.”
Earlier this month, a House Education and the Workforce subcommittee held a hearing largely devoted to excoriating the overtime rule, sight unseen. Republican Rep. Tim Walberg, the subcommittee chairman, pledged to oppose any overtime proposal that “goes too far” or that would “inflict harm on the nation’s workplaces.”
The overtime threshold has been updated only once since 1975, and now covers just 8 percent of salaried workers, according to an analysis by the left-leaning Economic Policy Institute. Raising the threshold to $50,440 would bring it roughly in line with the 1975 threshold, after inflation. Back then, that covered about 62 percent of salaried workers. But because of subsequent changes in the US economy, Obama’s proposed rule for workers would cover a smaller percentage—about 40 percent.
The current overtime rules contain a white collar exemption, which excludes “executive, administrative and professional” employees from receiving overtime pay. Advocates for changing the rule argue the white collar exemption allows employers to avoid paying lower-wage employees overtime. The proposed rule contains “no specific changes to this duties test, but instead solicits questions from the public about how best to alter it.”
As in the past, the new threshold will not affect teachers, lawyers, doctors and judges, who are all automatically exempt from overtime. The White House also said 56 percent of those who would benefit in the first year are women, and 53 percent have a college or advanced degree.
“As president, my top priority is to strengthen the middle class, expand opportunity and grow the economy,” Obama wrote. “That’s why I believe in middle-class economics—the idea that our country does best when everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules. It’s driven me from day one. It’s fueled our American comeback. And it’s at the heart of the fundamental choice our country faces today.” (with reports from Politico, Huffington Post, Los Angeles Times, OC Register, Minneapolis Star Tribune, The Washington Times)
(www.asianjournal.com)
(LA Weekend July 4 – 7, 2015 Sec A pg. 1)
