The Good News and the Bad News

[Content Note: Class warfare; worker exploitation.]

The Good News is that President Obama has announced plans to make a significant change to the overtime exemption:

Here's a convenient way of getting more work out of your employees, without paying the required time-and-a-half pay for anything over 40 hours a week: Call them "managers." Currently, these so-called white collar workers are exempt from overtime if they make more than $455 a week or $23,660 per year, even if they perform routine tasks like stocking shelves at a convenience store. In fact, those small-time bosses don't even have to be paid anything more for the extra hours they put in to get the job done, not even minimum wage.

Monday night, President Obama announced that he wants to double that threshold, to $50,400 per year. The move would expand the number of people eligible for overtime from about 8 percent of the salaried workforce to about 40 percent, according to a recent analysis by the left-leaning, labor-friendly Economic Policy Institute.

"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," Obama wrote in a Huffington Post op-ed announcing the decision.

Lots of my friends, across a number of industries, have experienced this phenomenon. I experienced it, too, back when I was working in Corporate America. And for many people who go from hourly wages with overtime to a salaried wage with no overtime, because you're declared a "manager," it ends up being a steep cut in pay. An employer might raise your base salary, but if they're requiring you to work all kinds of hours for which they suddenly stop paying you, it's often a reduction in your income, with no reduction in workload.

There are federal guidelines that define that constitutes a "manager," but many employers don't follow those guidelines, hoping their employees either don't know their position has been illegally redefined or values their job too much to cause trouble. Or, you know, isn't getting paid enough to even hire an attorney.

It's a major area of worker exploitation in the US, and while raising the exemption threshold is not a comprehensive solution, especially when workers' rights are not rigorously enforced, it's a necessary and excellent step.

And it's a step Obama can take on his own:

Obama, who has implemented a number of his most consequential workplace policies through executive order, doesn't need congressional approval to implement the new overtime rule. However, it will have to go through a public comment period, and employers will have lots to say.

Which brings us to the Bad News: Employers are already pushing back hard.

Rather than just paying managers more for the extra time, a study commissioned by the National Retail Federation warned that employers would likely hire more part timers to do that work, and cut base pay and benefits to keep people's compensation the same overall. Meanwhile, companies might have to cut down on the number of managerial jobs they offer, making it more difficult for employees to climb the professional ranks and leading to more inequality in the workforce, not less. Nonetheless, even if they're able to avoid paying more for labor -- and there's evidence to suggest they won't be able to avoid it completely -- employers fret that the change would still cost them hundreds of millions of dollars to make the adjustment.

Now, if businesses think the Department of Labor didn't do enough to consider the economic impact of the new rule, they could try to block it in the courts -- or at least delay it, in hopes of running out the clock until a more sympathetic administration arrives in the White House. Alternatively, some experts think businesses might end up pushing to amend the Fair Labor Standards Act itself to block the new rule.

Emphases mine.

What employers are threatening—hire more part-time workers to cut the number of employees with benefits; diminish the number of positions to prevent promotions that yield higher salaries—are things that employers have already been doing for years. Which is part of the reason why this proposal isn't a comprehensive solution: What we need are tighter labor regulations that prevent precisely this sort of profit-maximizing (and often nakedly spiteful) worker exploitation and artificial salary depression and all the "speedup" practices, like not filling jobs when people leave and simply redistributing their work among remaining staff, who aren't compensated for the additional duties.

The frank truth is that many, many US employers have shown they simply won't act in the best, or even in the most basically fair, interests of their employees unless they are forced by regulation to do so. So that's what needs to happen.

The market simply doesn't solve the problem, when the problem is exploited workers.