Under the Fair Labor Standards Act, employers have to provide overtime pay (usually time and a half) to employees who work more than 40 hours a week, but executives and managers are exempt from the requirement, as are those who make higher salaries. The trouble is that the rules don’t account for inflation, and so over time, what constituted a higher salary became absurdly low. The threshold has been raised only once since 1975, when it covered nearly half of U.S. workers; today it stands at less than $24,000, or lower than the poverty level for a family of four. (This document from the Economic Policy Institute offers some background on the regulation if you’re interested.) Here’s how Obama described the change he will be making:
We’ve got to keep making sure hard work is rewarded. Right now, too many Americans are working long days for less pay than they deserve. 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.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.That’s how America should do business. In this country, a hard day’s work deserves a fair day’s pay. That’s at the heart of what it means to be middle class in America.
We should note that Obama could have gone higher than $50,400. Earlier this year, some Democrats on Capitol Hill worried that the administration was going to propose a lower overtime threshold, something like $42,000 a year. A group of liberal senators urged Obama to set the threshold at $54,000. They also argued that it should be pegged to increase with inflation going forward, an absolutely critical provision that would give the measure lasting effect. So Obama didn’t raise the threshold as far as they wanted, but he is accounting for future inflation, by pegging the overtime threshold to the 40th percentile of incomes.
As much as Republicans will object, they can’t expect that their next president will undo this action. There are some regulations that we can expect to change whenever the White House changes hands. For instance, the Mexico City Policy, also known as the “global gag rule,” prohibits the funding of any organization anywhere in the world that even discusses abortion with a woman; when a Republican president takes office, he institutes it, and when a Democratic president takes office, he revokes it. But rules such as this one almost certainly won’t fall into that category. Try to imagine a President Rubio or Walker announcing that he was taking overtime pay away from millions of lower-middle-class U.S. workers. It won’t happen. They may argue against the rule when it is proposed, but once it’s in place, undoing it becomes politically impossible.
The more immediate political impact of this rule change lies in its place among a constellation of proposals Democrats will be offering on things such as the minimum wage and paid sick leave, proposals that are aimed at arresting the growing cruelty of the American workplace. As I’ve argued before, one way to think about the contrast between what Republicans and Democrats offer on the economy is that Republicans say they’ll get you as far as your employer’s door, while Democrats want to walk inside with you. Republicans argue that their preferred policies, mostly tax cuts and light regulation on businesses, will accelerate growth so that new jobs will be created. But once you’ve got the job, you’re on your own. The Democratic argument is that government has to come inside the workplace, to make sure people are being treated fairly. So they want to increase pay, provide family and sick leave, allow workers to bargain collectively, make sure no one is discriminated against and generally establish a structure that guarantees that people are treated well and can maintain some measure of dignity.
The Republican counter, of course, is that all those things increase costs to employers and therefore cost jobs. But their argument presumes that there’s nothing fundamentally wrong with the American workplace, which most of us know just isn’t true. Yes, many employers already treat their employers well. But millions of others don’t and would treat their workers even worse if they could get away with it.
As for this measure, we know exactly what employers will say: This will cost us money, which means fewer jobs. We know that’s what they will say, because that’s what they say about every marginal improvement in working conditions, benefits or pay. And in the short term, they’re right: It will cost them some money.
But let’s turn it around. What if employers said, “We could save money by removing the employee bathrooms and just telling our workers to wear Depends to the job. And that would mean we’d be able to hire more people.” Would we respond, “Well, if it would save you money and produce a few more jobs, then that sounds great”? Of course not. The short-term cost to employers of a regulation is certainly something to consider, but it’s not the only thing to consider.
The change to overtime regulations isn’t some kind of dramatic transformation. Like increasing the minimum wage, it’s nothing more than taking an existing rule and updating it for inflation. But it’s built on the assumption that the government should come into the workplace and make sure that what happens there is fair. Republicans don’t believe that’s government’s job. But it isn’t going to be easy for them to make that case to a population that feels increasingly insecure at work. And even if they could win the argument, they won’t be able to change the policy.