It’s a fair question:
If income inequity is a major problem, what could the federal government do to address it? What could it reasonably, legitimately do in order to protect the American working and middle classes from the economic forces that continue to undermine their earning power?
Here’s one simple answer: Overtime pay for overtime work.
It is not by any means a new or revolutionary answer. The Fair Labor Standards Act, which established the minimum wage, the 40-hour work week, child labor laws and overtime pay, was passed way back in 1938.** By now, those are basic, fundamental concepts that should no longer be considered controversial. But thanks to concerted business lobbying and Republican opposition, some of its provisions have been rendered pretty much toothless by the passage of time.
For example, from the beginning the FLSA has recognized that requiring time-and-a-half pay for hours beyond the standard 40-hour work week would not be appropriate for higher-paid, salaried workers in professional, administrative and managerial jobs. The question is how you exempt those workers while still protecting those who do need that protection. The distinction can be thorny, because employers often try to evade the law by classifying all or most of their workforce as professional or supervisory, and thus ineligible for overtime.
One mechanism to make that distinction is by pay level. Under the FLSA, anybody paid below a certain base amount is assumed not to be a professional or supervisory worker, and thus eligible for overtime. If you “inflation-adjust” the threshold that was in effect way back in 1975, today it would be $50,440.
However, that threshold has NOT been adjusted for inflation. Today, the pay threshold in defining managerial and professional workers has become so absurdly low as to be almost meaningless. At $23,660, it’s below poverty wages for a family of four.
To give you some idea of the impact, some 65 percent of salaried workers fell below the threshold in 1975, meaning they were eligible for protection under the overtime rule. Today, just 11 percent of salaried employees are covered by the rule.
More than a year ago, President Obama issued an executive order to begin modernizing the overtime salary threshold, a step that is clearly within his powers as president. Immediately, congressional Republicans pledged to do everything within their own powers to stop him.
“If you don’t have a job, you don’t qualify for overtime,” House Speaker John Boehner said in March 2014. “So what do you get out of it? You get nothing. 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.”
In the 15 months since Boehner’s prediction, the economy has added 3.6 million jobs, the unemployment rate has fallen from 6.7 percent to 5.5 percent, and the Obama administration has moved close to issuing its new proposed overtime rule. It may be released for public comment as soon as this week, and Republican leaders are rallying to try to halt it.
As Sen. Lamar Alexander put it, the still-unreleased proposal “seems engineered to make it as unappealing as possible to be an employer creating jobs in this country.”
Many employers of course would prefer to continue denying overtime pay to millions of lower-paid Americans whom the long-standing law was clearly designed to protect. On the other hand, raising the threshold would mean that a lot more hard-working Americans who have been working 50- or 60-hour weeks would start to get paid time and a half for that overtime, just as the law envisions.
And employers do have an option to avoid that penalty. If they don’t want to pay that time-and-a-half rate, they could actually take the step of hiring additional employees to share the work burden. What a concept!
Just to refresh your memory, here’s a chart that documents the declining share of our nation’s economic output being paid to its working people, i.e., those who go to work each day so they can pay the rent or mortgage, buy food for their families, etc.:
And here’s a chart over the same time frame documenting the rise of after-tax corporate profits as a share of the national economy. As you can see, that share has more than doubled in the past 25 years over its post-World War II historic norm. (And again, it’s AFTER-TAX corporate profit.
** The 40-hour work week may now be considered basic law, but its adoption in 1938 was accomplished only after a long, bitter legislative and legal battle. Prior attempts at such regulation had earlier been struck down by the U.S. Supreme Court as unconstitutional, and Southern politicians in particular argued that a minimum wage and maximum work week would force mass layoffs.
“What profiteth the laborer of the South if he gain the enactment of a wage-and-hour law — 40 cents per hour and 40 hours per week — if he then lose the opportunity to work?”, as Rep. John McClellan of Arkansas put it.
So no, the basic argument hasn’t changed much at all.