The Obama administration proposed new rules last week that would nearly double the pay threshold below which employees automatically qualify for overtime pay. The new rules will do little to help workers, but they will help President Obama keep up his record of low wage-growth and less full-time hiring in the U.S. economy.
Federal labor law requires that those working more than 40 hours a week be paid 1.5 times their base rate of pay. But currently, employees who make more than $23,660 and perform managerial tasks can be exempted, depending on their precise circumstances. Under Obama’s new rule, which many left-wing groups have been advocating, anyone making less than $50,440 per year — close to America’s median household income — would automatically be entitled to time-and-a-half whenever they work more than 40 hours.
The rule’s advocates speak of this change as if it will suddenly boost the pay of millions. In fact, this is the least likely result. Far more likely is a shift toward part-time hiring, a downward adjustment of starting salaries for low-paying management jobs, and more vigorous corporate micromanagement of workers’ hours for jobs where overtime is not generally considered necessary.
All workers below this newly elevated threshold will also lose the flexibility to work extra hours during one calendar week in order to take hours off in other. Under federal labor law, it is considered a form of exploitation for a grown-up to choose to work 41 hours this week and 39 the next, even if it is strictly for his own convenience, unless his employer agrees to pay him for an extra half hour.
A consequence that Washington’s professional class has likely overlooked is the effect this will have on them and on people like them all around America. Younger, college-educated workers — especially the newcomers at think tanks, news publications, non-profits and congressional offices — typically start far below $54,400 per year, as do young clerical workers of all kinds who hope to advance rapidly in their career.
Those young professional hopefuls who are fortunate enough to find jobs — and this rule means probably fewer of them will be so fortunate — will probably find their starting base pay reduced and their workplaces more bureaucratic than in the past. (Hope you enjoy filling out detailed time-sheets!) If you, like so many in this town, hoped to advance quickly based on your willingness to work long hours when important tasks were at hand, then sorry about that. You’re more likely to be sent home early, because the last thing your employer needs is a complaint.
The low threshold that currently exists for the overtime exemption has long served as a sort of informal compromise to circumvent a rigid and inflexible law from another era. Eighty years ago, when there weren’t dozens of other rules and regulations protecting employees from the worst abuses, such confining and strict rules surely seemed appropriate and necessary. Today, though, work arrangements are constantly changing and subject to big innovations. Many workers don’t even have formal workplaces.
Officials should be working to reform the underlying laws, to bring them into the modern world, rather than looking for new ways to make old, outdated laws even more confining.
