Overtime pay rule: Another attempt to override the weak economy

People seeking work stand in line outside a job fair in Cobb County, January 2015. (Jonathan Phillips / Special)

People seeking work stand in line outside a job fair in Cobb County, January 2015. (Jonathan Phillips / Special)

The Trump phenomenon, with its rejection of so much center-right orthodoxy, has made a number of people wonder if traditional Republican economic policies are irrelevant to many Americans. Meanwhile, Democrats continue to demonstrate their policies are simply economically illiterate.

The Obama administration — which has been active on the policy-decree front lately — issued another directive this week. It more than doubles raises the threshold at which salaried workers must be paid overtime: The new ceiling is $47,500 in annual pay, up from $23,660.

This is another entry in the proud liberal history of believing government can simply order higher wages without negative, offsetting consequences in the real world. Like the talk about a $15 national minimum wage, the overtime-pay policy is ostensibly premised on the notion that employers are withholding great sums of money from workers for no good reason.

Reality is different. Wages aren’t rising for a variety of reasons, but simple greed isn’t high among them. The post-recession economy has created job growth that’s been steady but too slow to boost pay on its own. Despite the steady growth, there’s still a great deal of slack in the labor market. A recent report by the Federal Reserve suggests that, seven years after the recession ended, more Americans than previously thought are still working fewer hours than they’d like. And it’s not just part-time workers, the study’s authors write: “Indeed, our analysis suggests that part-time workers … may only account for one fifth of the total additional hours that workers wanted to work but were unable to.” This “involuntary underemployment” is persistent, with the Fed’s data showing half of the households experiencing it in any given year will also be stuck with it in the following year.

It’s very likely that labor-market slack is dragging down wages more than businesses’ failure to pay overtime to some workers (the administration estimates the new policy would affect about 4.2 million workers). And even those workers who now qualify for overtime pay won’t necessarily see it. They may instead be asked to work fewer hours, or businesses may decide to rely on more part-time workers to avoid paying time-and-a-half for the full-time employees. The slack in the labor market gives employers options, and the overall mediocrity of the recovery — not to mention the likelihood of a recession sooner than later, given historical norms — will make them more likely to take the less costly, less risky options.

As the Pittsburgh Tribune-Review editorial board succinctly put it, “Thus, hours will be reduced. Some employees will be fired. Full-time jobs will be replaced with part-time jobs. And this is what ‘progressives’ call ‘progress.'” Emphasis original.

It’s fashionable to say Republicans don’t have the right economic policies for the current age, and there is some truth to that. But the poor alternatives offered by the Democrats are not, in fact, better than nothing.

Reader Comments 0

160 comments
AvgGeorgian
AvgGeorgian

"The Obama administration — which has been active on the policy-decree front lately — issued another directive this week. It more than doubles raises the threshold at which salaried workers must be paid overtime: The new ceiling is $47,500 in annual pay, up from $23,660"


So Kyle, your logic seems to argue that lowering the $23K to $10K would help workers. Right? Then wouldn't a $1 minimum wage help even more?

TheCentrist
TheCentrist

It is a joke when someone making $35K is classified "exempt," to avoid overtime, and they have the supervisory skills and responsibilities of a chipmunk.

Lil_Barry_Bailout
Lil_Barry_Bailout

@TheCentrist

It's a joke when the government, and especially a know-nothing like Obama, gets to dictate employment terms that SHOULD be determined by agreement between employer and employee.

AvgGeorgian
AvgGeorgian

@Lil_Barry_Bailout @TheCentrist


Lilbaba-But you want the government to use regulation to protect you from free markets. Whats the matter? Can't you just live up to your agreement to buy something from a business without the government holding your hand? 

TheCentrist
TheCentrist

Kyle, it is more than just fashionable, but emphatic, to say that the social conservatives do not have any economic policies for the current age.  In fact, they don't want any fiscal policies (government so small that it could drown in a bathtub) or monetary policies (eliminate the Federal Reserve).


Every time I hear the phrase "Government Over-reach," I think "Totally Disgusting Congressional Inaction."

Nick_Danger
Nick_Danger

Kyle, I see you support the current policies that increase income disparity in the US, and will fight any attempt to level the playing field.  NTTAWWT. 

HeyThere
HeyThere

Kyle I normally like your columns but this one comes across as dishonest. The new overtime pay rules simply restore the original number - adjusted for inflation - set in the 1970s. We have minimum wages for a reason. Making an employee earning $23,000 a year salaried is obviously a loophole to abuse workers' time without compensation.

As for employees having hours cut, this presupposes they are there for some reason other than to work. Why are they being paid at all if the employer doesn't need them? The truth is the employer does need them, and now will have to pay extra when they work more, as it should be. It's a sad state of affairs when we are dedicating time to arguing that someone making $30,000 or $40,000 a year should not be eligible for overtime.

Lil_Barry_Bailout
Lil_Barry_Bailout

@HeyThere

Being eligible for overtime is one thing, getting to work those extra hours is another.  I believe Kyle's point was that employers might keep their labor costs as low as possible by cutting hours to no more than 40 per week and adding employees to pick up the extra hours.

Truth05
Truth05

Leave it to Republicans to be angry about regular workers actually being compensated for their time. Of course when the situation is reversed and Republicans are defending excessive CEO pay they justify it by saying it's only right they be paid for their time...

irishmafia1457
irishmafia1457

Basic econ, a business has so many dollars allocated for payroll and related expenses (unemployment, social security, workmens comp etc.) Just because the Obama admin says you will have to pay more for your employees (Obamacare, minimum wage, OT ) doesn't mean the employer suddenly has more money to shell out. So the solution is A. Raise prices B. cut hours/employees C. Both

HeyThere
HeyThere

@irishmafia1457 yea, these poor salaried employees will have go to home after working 40 hours to receive the same pay as before. So wrong...

Nick_Danger
Nick_Danger

@irishmafia1457 

"Basic econ, a business has so many dollars..." 

Why should federal policy be based upon the needs of the corporation, and not the needs of the employee?  The government is supposed to represent ALL the people, even the ones that do the work.

TicTacs
TicTacs

BS.  Wages go up, inflation is real.  The numbers have to be adjusted,  the concept is not new at all,  just brought up to date.

GA4LIFE
GA4LIFE

The recession ended 7 years ago? That is insulting to everyone's intelligence.

Lil_Barry_Bailout
Lil_Barry_Bailout

The last seven years feel like a recession to most people, thanks to Obama's idiotic and un-American policies. Recessions aren't defined by your feels though, they're defined by math.

Our President Bush bequeathed a recovery to Obama, and like so many other things, Obama turned victory into defeat.

TicTacs
TicTacs

@Lil_Barry_Bailout Been a great run,  it would have been worse with the GOP and their constant trouble they create.

sssinff
sssinff

Are you high? This relates to paying your for hours you work, not increasing wages. My hours will be reduced? Great! Now I can work a 40 hour week. If an employer needs more work, pay me for time plus one half, or hire someone to pick up the slack. I don't see how this is a bad thing.

Opus
Opus

Kyle will NEVER discuss the difference between worker productivity and worker pay, because it totally destroys his argument.


https://www.google.com/imgres?imgurl=http://www.outsidethebeltway.com/wp-content/uploads/2012/07/wages-stagnate-productivity-grows-570x389.png&imgrefurl=http://www.outsidethebeltway.com/what-happened-to-the-wage-and-productivity-link/&docid=gmor3yqoIyGhPM&tbnid=rYlZurwrck47VM:&w=570&h=389&bih=1236&biw=2251&ved=0ahUKEwjKuLTggO_MAhVELB4KHSXUBqoQMwgsKAswCw&iact=mrc&uact=8


The workers producing goods increase their output year to year but somehow their income never increases.


Airheads like Kyle and his sycophants on this board will never make the connection between a trillion dollars in worker productivity that never trickles down to the workers and growing wealth inequality.  Instead we'll hear some pious platitude about 'equality of effort.'


If the minimum wage had been tied to worker productivity in 1980 the minimum wage would now be in the neighborhood of $22/hour.  Enough to support a family on, but that's irrelevant when your job is to obfuscate economic reality and keep the money flowing uphill.

Lil_Barry_Bailout
Lil_Barry_Bailout

Wages are based on supply and demand for labor.

Nice red herring, though.

Lil_Barry_Bailout
Lil_Barry_Bailout

Heard Obozo bragging that this new mandate would increase wages by $12 billion. Over ten years. For you Democrats, that's $1.2 billion per year.

In a nation of 300 million...33 cents per person per month. Go ahead and get cheese on that McDonald's hamburger!

This is of a piece with his allowing men into the little girls bathroom--just a distraction from his pathetic failures at home and abroad.

jamesatl
jamesatl

@Lil_Barry_Bailout Obama is a worthless tool. It will be a breath of fresh air just to have the idiot gone from the White House come January.

Truth05
Truth05

@Lil_Barry_Bailout Interesting. Except that the actual number of working persons is 122 million. But don't let facts get in the way of your ignorance.

Astropig
Astropig

The old rules were being abused by businesses-mostly big businesses.They learned real fast that they could call someone and "assistant manager" and make virtual wage slaves of them because they were technically "salary management".60 hour weeks are pretty common with these people. That's really just a full time job and a part time job stacked together to save BIGiantHugeCo a few bucks.Add in commute time,time spent "covering" for co-workers that have sick kids and just don't show up,and it's no wonder that an entire generation thinks that capitalism doesn't work...


...But they would be wrong. Capitalism does work.But the rules being changed here were NOT capitalism.They were just the unfair exploitation of desperate people for big company profits.In true capitalism,people standard of living improves with honest hard work.These jobs do anything BUT reward the employees that hold them.They can't have any kind of life.Their marriage and parenting is severely damaged for "the good of the company"-The same company that will let them go when they are 57 years old because they have a fresh crop of wage slaves.Their pay (seen as an hourly wage) is little better than the minimum.They frequently have to buy uniforms and company-logo apparel with their own money.They're treated as less valuable than the equipment that they maintain.


I'm more conservative than you can shake a stick at,but I applaud this move by an administration that I despise. The old floor for overtime ($23K) was wildly out of touch with reality.


If you business model is based on artificially cheap labor to make a profit,you aren't a real good businessman.

Lil_Barry_Bailout
Lil_Barry_Bailout

I'm sure you put your money where your mouth is and only buy American.

Starik
Starik

@Lil_Barry_Bailout Shoes are made in third world countries where workers are paid miserable wages and there are no rules to protect them.  For you,  paradise. 

LDH2O
LDH2O

" A recent report by the Federal Reserve suggests that, seven years after the recession ended, more Americans than previously thought are still working fewer hours than they’d like." I read the report, it shows that 1) this is a new study with a new methodology that has not been peer reviewed so we do not know about its accuracy and 2) If it is accurate, it shows that the number of part timers who want more has fallen under Obama. SO while the number is not perfect, Obama made it better.  I used to work at the Fed in ATL and they have small groups of researchers that put out these reports all the time. This is NOT representative of the Fed Reserve System or Yellen. In fact, the report says, "Disclaimer: FEDS Notes are articles in which Board economists offer their own views." Hey but grasp at anything to make O. look bad.

LDH2O
LDH2O

@omark You mean like airline safety, food safety, and auto mileage all of which would be in the pits if it weren't for government regulation. Or do you want to go back to the good old days of the Jungle as documented by Upton Sinclair?

omark
omark

Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. 

….Abraham Lincoln

So workers are liabilities. You guys are priceless.

Lil_Barry_Bailout
Lil_Barry_Bailout

@omark

Some certainly are.  Most of those have Obama or Hillary or Bernie stickers on the back of their cars.  No one is sad to see them canned.

RoadScholar
RoadScholar

"Wages aren’t rising for a variety of reasons, but simple greed isn’t high among them."

With record corporate profits and low if any wage increases, what world do you work in. I realize people take a job knowing the conditions of employment. But over time, employers keep adding responsibilities with little if any wage increases. Where I worked, a promotion increased responsibilities exponentially, while pay increased 10%. Yearly raises and benefits lately have been non existent. More work for less pay and benefits.My brother in law has seen "mass firings" of financial advisers mid year so the firm does not have to pay them the bonus money they had accumulated which would only be paid at the end of their fiscal year. Guess where that money goes...and it ain't in training, wages, bonuses etc.  .....except bonuses to the upper management and boards.


"They may instead be asked to work fewer hours, or businesses may decide to rely on more part-time workers to avoid paying time-and-a-half for the full-time employees." Why not. Instead of paying overtime, if work flow is fairly constant, why not take the pressure off their full time employees? It would cost less to hire more workers, esp if a business is expanding. If not, having part time trained employees provides an immediate labor pool already trained to replace workers fired, transferred, promoted, and retired. Oh, have you noticed the plethora of older workers laid off due to costs, and  immediately  replaced by younger, inexperienced. lower paid workers? Many times the expertise and "history" is put out to farm resulting in phone calls asking them for info. It happened to me when I retired!

Lil_Barry_Bailout
Lil_Barry_Bailout

@RoadScholar

Too bad the economy isn't growing.  That's what drives demand for employees and pushes salaries up.

Probably what we need are higher taxes, more regulations, more mandates, more legal uncertainty, and more government hassling of business.  Surely that will do the trick.

goat diddler
goat diddler

The economy grows when more people have more money in thier hands to spend.

I'd be all for all the tax cuts you wish to shower down on corporations if it actually resulted in the growth of jerbs or wages...

goat diddler
goat diddler

Not true... again... plenty of people "earned" more money during the Obama years... just not the folks that actually spend that money and drive the economy...

Derp...

Lil_Barry_Bailout
Lil_Barry_Bailout

if you're an Obama supporter, you've helped block the policies that help people earn more money.

1Robert
1Robert

@foo2u How does that work ?  Some people earned a lot of money but they put it under their mattresses ?  Does new investment ever drive the economy in your world or is it only people that live paycheck to paycheck and shop at Walmart ?

goat diddler
goat diddler

"Obama: Fourth worst economy ever. Even W did better."

Can you substantiate that little nugget of... " wisdom"?

Lil_Barry_Bailout
Lil_Barry_Bailout

Feel free to point out the errors in the link you asked for.

goat diddler
goat diddler

Thank you for representing your confirmation bias as "proof"... can we get an additional source?

Derp...

goat diddler
goat diddler

"Where President Obama turned the terrible economic hand he was dealt into a middling economic result, President George W. Bush turned a middling economic hand into a terrible economic result. His presidency was characterized by extreme fiscal irresponsibility at a time when there was no real economic rationale for it, by an escalation of trickle-down policies that sapped consumer spending and economic health, and by rampant deregulation that created dramatic economic risks. "

Lil_Barry_Bailout
Lil_Barry_Bailout

Our President Bush inherited the dot-com bubble-burst, the 9/11 attack, and the legacy of eight years doing nothing about Islamofascism, and gave us better economic growth, lower taxes, lower unemployment, lower government spending, smaller deficits, and better race relations than has Obama. He fixed the housing mess and left an economy that would exit recession in June 2009.

Not too shabby. And far superior to your Idiot Messiah Obama.

Lil_Barry_Bailout
Lil_Barry_Bailout

That makes zero sense. Spending was lower, much lower, on Bush's watch, and Obama and a Democrat congress CHOSE to increase spending, including on Obamacare (Bush's fault?), student loan defaults, food stamps, ad nauseum.

Lil_Barry_Bailout
Lil_Barry_Bailout

@foo2u

Who do you think has spent more, including off-budget items such as the Iraq war?

Your Idiot Messiah.  And it's not even close.

goat diddler
goat diddler

Thats what happens when Bushdrunk runs up the credit cards and slinks off to Texas with his tail between his legs..

Starik
Starik

@foo2u It's a waste of time asking LBB to explain his "facts" and opinions.  They exist in his head, and only in his head, sealed in concrete.

Opus
Opus

@Lil_Barry_Bailout Check your calendar, LBB, 9/11 OCCURRED on GWB's watch.  And his administration dissolved the Bin Laden task force in January 2011 because he posed no threat to the USA.


Thanks for playing.  Here's your sign!

Lil_Barry_Bailout
Lil_Barry_Bailout

9/11 was conceived, planned, and trained for on Clinton's watch. The terrorists began deploying on Clinton's watch. Our President Bush inherited that mess, the sad result of Clinton's eight years of doing nothing about Islamofascism.

Are you really as ignorant as you seem?

goat diddler
goat diddler

Well... it's a highly partisan source... with an axe to grind... therefore not reliable for reasoned discussion...

goat diddler
goat diddler

Yeah he "fixed" the housing "mess"... he fixed the housing "mess" real good...

You left "started a war of choice by lying to the nation, and paid for on credit" off your list of "accomplishments"...

Thanks for the laughs...

Derp...