This week, President Obama will propose giving 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 will formally announce the rule during a trip on July 2nd to La Crosse, Wisconsin.
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.
“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 Chamber of Commerce, a major White House ally in the recent trade fight, is deeply opposed to the idea. 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 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.
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.
“This week, I’ll head to Wisconsin to discuss my 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.
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.
“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)
