Millions Of Workers Can Expect A Pay Raise At The End Of 2016

Department Of Labor Updates Overtime Rules, Expands Overtime To 4.2 Million American Workers. The Department Of Labor (DOL) released an update to overtime regulations on May 17, at the direction of President Obama, that raises the minimum salary threshold to qualify for guaranteed overtime pay. The new DOL stipulations mandate that employers pay overtime to qualifying salaried workers who make up to $913 per week, or $47,476 per year, up from the previous level of $23,660. This change, which goes into effect on December 1, 2016, “extends the right to overtime pay to an estimated 4.2 million workers” and will be updated every three years to keep up with inflation.

[Department of Labor, 5/17/16, May 2016]

White House: Share Of Full-Time Workers Protected By Overtime Pay Has Fallen To Just 7 Percent. According to information distributed by the White House, the proportion of full-time employees who qualify for overtime pay “has plummeted from 62 percent in 1975 to 7 percent today,” a contributing factor in the “relatively stagnant wages” that American workers have suffered from “for the past few decades.” [The White House, Office of the Press Secretary, 5/17/16]

Right-Wing Media Claim Lifting Workers Up Will Devastate The U.S. Economy

Wash. Examiner: President Obama Is “Interfering” With Business With Worker Protection Rule. The Washington Examiner opined in an editorial that the new rules would prevent employers from granting workers flexible hours. The Examiner claimed updating overtime rules to ensure employees are paid for additional hours worked constitutes the government “interfering” with businesses’ ability to offer employees a “favor by being so flexible.” [The Washington Examiner, 5/19/16]

WSJ: Obama Attempting To “Conjure Raises” For Votes. The Wall Street Journal decried the updated overtime rule in a May 18 editorial, claiming employers will lower salaries as a result and the president is changing the rules solely to entice voters:

Incomes have barely budged during the Obama Presidency, but an election is coming so the White House has found a way to conjure raises another way: simply declare them, via the week’s rule mandating that employers pay overtime to millions of more workers. As usual, this mandate will hurt more workers than it helps.

[...]

Some employers will bump up the salaries of workers who earn just below the threshold to avoid the mandate. But in return these workers may receive fewer benefits and bonuses, only 10% of which count toward the threshold.

A National Retail Federation study estimates that the rule will cause employers to shift about a third of salaried retail and restaurant workers to hourly status. One in 10 salaried employees—including many managers—will see their hours reduced. Some employers will hire more temps and part-time workers. And Democrats complain about the uncertainty of the “gig” economy? [The Wall Street Journal, 5/18/16]

Townhall: “Employees Lose” From Overtime Expansion. Townhall berated Thomas Perez, the secretary of labor, for “paint[ing] a picture” of the overtime update as helping workers, claiming that such a view is “idealistic.” Townhall falsely claimed employees would be hurt if overtime protections are extended to them. [Townhall, 5/18/16]

Wash. Times Columnist Says Overtime Looks Good “On Paper,” But Claims It Will Devastate America’s Economy. Washington Times columnist Kelly Riddell lambasted the new overtime rule on May 18, claiming the rule will be “devastating to our nation’s job growth and economy.” Riddell claimed that ensuring workers are paid for the hours worked would be harmful to businesses -- even going on to claim that businesses may compensate by “pushing these jobs off the books” and violating federal regulations:

Increasing overtime pay — much like boosting the federal minimum wage — sounds like a good idea on paper but, in practice, will be devastating to our nation’s job growth and economy.

The Obama administration, following up on a proposal announced last year, made good on their promise to force employers to pay time-and-a-half for overtime hours. In the short term, businesses will boost the salaries for about 4.2 million workers; in the long term, the effects are harrowing.

[...]

There’s no doubt these same economic reverberations are going to happen with increased time-and-a-half pay. Businesses will adjust — either by pushing these jobs off the books and into a regulatory grey area, or by cutting jobs and reducing hours, all of which are more detrimental to the employee. [The Washington Times, 5/17/16]

Fast-Food CEO: Expanding Overtime Adds To “Regulatory Maze.” Andy Puzder, CEO of CKE Restaurants (parent company of Carl’s Jr., Hardee’s, and others), blasted the new overtime rule, writing in a May 18 op-ed in Forbes that it would inspire employers to shift entry-level managers at his restaurants to hourly wages, preventing them from allocating their time as they see fit. Puzder claimed that having a salaried position -- and thus no overtime pay -- is an “opportunity” that confers “prestige” and “an increased sense of ownership” to managers. [Forbes, 5/18/16]

Fox Business Host Attempts To Castigate Overtime Expansion, Gets Schooled Instead. Fox Business host Stuart Varney tried to attack the federal overtime pay regulations on the May 18 edition of Varney & Co., but was caught off guard when guest Jack Hough correctly pointed out that low-wage employers currently enjoy unfair “corporate welfare,” which subsidizes their business model. Hough argued that a lack of overtime protections amounts to letting low-wage employers “reach[] both hands into my pockets” to pay employees whose poverty wages force them to seek government assistance. “It’s time for companies to pay their own payroll costs instead of coming to me,” Hough said. [Fox Business, Varney & Co., 5/18/16]

Economists Argue Millions Of Americans Will Benefit From Expanded Overtime Protections

EPI: Overtime Expansion Will Directly Benefit Up To 12.5 Million Workers. According to research from the Economic Policy Institute (EPI), 12.5 million workers (23.3 percent of the salaried workforce) will directly benefit from the expanded overtime protections. EPI also estimates that overtime expansion will benefit an additional 4.2 million parents nationwide and 7.3 million children:

[Economic Policy Institute, 5/17/16]

NELP: Overtime Update “Rectif[ies]” Generations Of Neglect For Fair Labor Standards Act. According to a joint statement from the National Employment Law Project (NELP) and Ford Foundation, the new overtime rule “will rectify” the problem of wage protections guaranteed by the the Fair Labor Standards Act (FLSA) “steadily erod[ing] since the late 1970s” (emphasis original):

“Because the rules governing exemptions from the FLSA’s overtime law have not been meaningfully updated for more than four decades, far too many Americans have been working longer and longer hours for less and less money,” noted Christine Owens, executive director of NELP.

[...]

Ford Foundation President Darren Walker also weighed in with support for the Department’s update of the rules. “The Labor Department’s new action on overtime pay is commendable and important. The rule will create greater financial stability for millions of Americans now working longer or unlimited overtime hours without compensation,” Walker said. [National Employment Law Project, 5/17/16]

IWPR: Updating Overtime Helps Mothers And Children. According to the Institute for Women’s Policy Research (IWPR), the overtime update is particularly important for women -- especially women of color and working mothers -- because “women are now the sole or co-breadwinner in half of American families with young children.” The IWPR stressed that the Department of Labor’s decision to peg the overtime threshold to an income floor based on average earnings in the southeastern United States is particularly important because “four out of five black mothers in the South are breadwinners.” In total, IWPR estimates roughly 2 million working moms will be assisted by this rule change:

The final $47,476 was chosen because it represents the earnings of the 40th percentile of salaried workers in the South. Women are now the sole or co-breadwinner in half of American families with young children. In the South, half of all breadwinner mothers are women of color, with black mothers especially likely to be carrying the responsibility [of] their family’s economic security. Four out of five black mothers in the South are breadwinners, compared with half of white and Hispanic mothers in the region. With over 2 million working mothers across the country newly covered under this final rule, more families … can benefit from additional earnings or, if not obligated to work long hours with no extra pay, more time with loved ones. [Institute for Women's Policy Research, 5/18/16]

EPI’s Ross Eisenbrey: White-Collar Workers Should Expect A Raise. A blog post by EPI vice president Ross Eisenbrey briefly outlined the types of workers who were previously exempt from overtime protections who should expect a pay increase as a result of the change -- including university researchers, news reporters, and an array of office workers. He wrote that employees typically working overtime and currently earning just below the new $47,476 threshold should expect a small pay bump from their employer with the expectation that they continue unpaid work above 40 hours, while the pay decisions for workers earning more “exploitative” salaries remain unclear. [Economic Policy Institute, 5/17/16]

CBPP’s Jared Bernstein: Overtime Update Will Have A Negligible Impact On Profits While Encouraging Job Growth. Economist Jared Bernstein of the Center on Budget and Policy Priorities (CBPP) praised the overtime update in The Washington Post as “a progressive change that was a long-time coming.” Contrary to right-wing media claims that the change will devastate the economy, Bernstein said it’s expected to cost employers about $1.2 billion annually (0.03 percent of total wages) via increased pay to employees. Bernstein also noted that employers will have ample flexibility to coordinate their workflow and compensation structure if they hope to avoid overtime charges. [The Washington Post, PostEverything, 5/18/16]

CAP’s Michael Madowitz: Overtime Expansion Is “A Big Step To Put More Money In Workers’ Pockets.” According to economist Michael Madowitz of the Center for American Progress (CAP), the decision to expand overtime protections to salaried workers making up to $47,476 is “a big step to put more money in workers’ pockets.” Madowitz noted that overtime statutes had not been updated since 2004, and that the update for 2016 and beyond “has real potential to raise incomes and economic growth” by creating incentives for employers to pay current workers more and increasing hiring to “make up the difference”:

A higher overtime threshold also has the potential to bring broader positive employment effects. While some firms will simply pay workers more, others will make adjustments to cap their covered employees at 40 hours a week. Firms that want to keep the same level of output -- but don’t want to pay overtime -- will hire new workers to make up the difference in the hours they capped.

Spreading the same income over more workers means more jobs, although it doesn’t raise incomes directly. But the implications for our economy are better than meets the eye. In fact, even the National Retail Federation, which opposes the overtime rule, estimates that setting the overtime threshold at a level a little higher than the administration’s rule would create 117,100 jobs in the retail and restaurant industries. Overall job creation across the economy would be even higher. [MarketWatch, 5/18/16]