Obama’s expected change to overtime rules would make more eligible for extra pay

Lackluster wage growth is propelling a new White House campaign to reexamine federal labor regulations that administration officials say are leaving more American workers unprotected every year.

The latest move by the White House is expected Thursday, when President Obama plans to announce that he is directing the Labor Department to use its rulemaking authority to beef up federal overtime protections, leading to higher wages for millions of workers.

Obama is also pressing Congress to raise the minimum wage for all workers. And, earlier this year, he took unilateral action to boost the $7.25 minimum wage to $10.10 for federal contractors.

The campaign comes as working-class Americans are struggling to get by on incomes that have not increased appreciably during the Obama administration, despite record corporate profits and a recovering economy. Though stagnant wages are primarily attributed to larger economic forces, economists say federal rules that have failed to keep pace with the growing cost of goods and services have also played a part.

While Obama largely ignored the issue during his first term, he has placed it at the center of his economic agenda ahead of this fall's congressional elections. Critics complain that the campaign is more rhetoric than substance — his proposal to raise the minimum wage to $10.10 is unlikely to clear Congress. Meanwhile, the move to change federal overtime rules, first reported by the New York Times, is not intended to produce results until the waning days of Obama’s presidency.

Betsey Stevenson, a member of President Obama's Council of Economic Advisers, explained some of the reasoning behind the White House's coming push to expand overtime pay at the daily briefing on Wednesday. (The Associated Press)

White House officials declined to describe the proposal in detail, suggesting only that they were contemplating a change in the salary threshold that determines whether an employee receives overtime pay for working more than 40 hours a week.

Under Labor Department regulations, salaried workers making more than $455 a week are not required to receive overtime pay. Administration officials suggested that the threshold should be raised to somewhere between $550 and $970.

“What we know right now is the threshold has been eroded by inflation, and there [are] 3.1 million people who, if the threshold had kept up just with inflation, would automatically be covered by overtime provisions,” Betsey Stevenson, a member of the White House Council of Economic Advisers, said Wednesday at the White House.

“The president believes that if you’re making $25,000 a year and you’re working 60 hours a week, you should be getting paid for the extra hours you work,” she added.

Republicans and business groups responded with disdain to the plan, arguing that it would destroy jobs and damage the economy. A spokesman for the National Federation of Independent Business blasted it as “another anti-business policy.”

House Speaker John A. Boehner (R-Ohio) accused Obama of focusing on the wrong problem at a time when unemployment stands at 6.7 percent.

“If you don’t have a job, you don’t qualify for overtime. So what do you get out of it? You get nothing,” Boehner told reporters. “The president’s policies are making it difficult for employers to expand employment. And until the president’s policies get out of the way, employers are going to continue to sit on their hands.”

Daniel Hamermesh, a University of Texas economics professor who specializes in labor issues, said he sees only positives in the president’s plan, even if businesses end up cutting employee hours because of the new policies.

“I would argue it’s a job-creation program,” Hamermesh said. “There’s no question it gives employers the incentive to cut the hours of some people. But if you do that, it increases the demand for more individuals, and that creates jobs.”

Paco Fabian, a representative of Good Jobs Nation, commended Obama for the coming directive, as well as for a recent executive order that raised the minimum wage for contractor employees working at federal facilities. But he said that more needs to be done.

“It’s great that the president is taking these steps, but the truth is that it’s not enough,” Fabian said, adding, “I think we need a better set of policies and clear, direct enforcement to solve some of these problems.”

Emmanuel Saez, a professor at the University of California at Berkeley, reported last year that from 2009 through 2012, the top 1 percent of earners saw their incomes grow by 31.4 percent. By contrast, the bottom 99 percent saw their incomes grow by only 0.4 percent.

Economists argue that the declining value of the minimum wage has also contributed to lagging wages. The $7.25 minimum wage has not increased since 2009.

White House officials and liberal economists who have studied the issue say millions of salaried employees are working 50 or 60 hours a week without overtime. And in some cases, these workers are “making barely enough to keep a family out of poverty,” one White House official said.

The federal government has the power to regulate overtime pay under the 1938 Fair Labor Standards Act, which set limits on the workweek, in addition to banning child labor and establishing a national minimum wage. Under the law, most workers are entitled to an hourly premium if they work more than 40 hours a week. But the Labor Department can approve exemptions, and one of the most prominent permits employers to deny overtime pay to “executive, administrative and professional” workers.

Companies have broad leeway to classify workers as being in this category, even if their job duties are far from what is generally considered white-collar work. Today, most workers who make more than $455 per week are eligible to be classified as “executive, administrative and professional.” Workers earning less than that must be paid overtime.

The George W. Bush administration set the $455 level in 2004, and it has not been adjusted since. If it had kept pace with inflation, the threshold would now be $553 per week. The White House noted that the Labor Department in 1975 set the threshold at $250 per week. If that standard had been maintained and adjusted for inflation, anyone earning less than $970 would be entitled to overtime pay.

California and New York have set state thresholds of $640 per week and $600 per week, respectively, with the caps set to rise to $800 and $675 in 2016.

Sen. John McCain (R-Ariz.) dismissed Obama’s plans as another example of the president’s unwillingness to engage with Congress.

“It’s the phone and the pen again,” McCain said. “How does he expect us to work with him when he does these things without even consulting us? . . . It just poisons relationships.”

Sen. Mary Landrieu (D-La.), who is facing a difficult path to reelection this fall, said she had not read Obama’s plans but generally supports paying overtime to workers “unless they’re in a very high executive position.”

Ed O’Keefe contributed to this report.

Zachary A. Goldfarb is policy editor at The Washington Post.
Josh Hicks covers the federal government and anchors the Federal Eye blog. He reported for newspapers in the Detroit and Seattle suburbs before joining the Post as a contributor to Glenn Kessler’s Fact Checker blog in 2011.
Comments
Show Comments
Most Read Politics