Lots to Like in New Overtime Rule, If You’re Not an Under-Paying Employer

May 23, 2016

Time for a celebration. And the U.S. Department of Labor has supplied a cause, as you may already have read. After far too many years and a lengthy process, it’s issued a final rule updating overtime requirements.

The rule reflects some concessions to upset employers. Basically, it sets the threshold below which all salaried workers must receive one-and-a-half times their regular pay when they work more than 40 hours a week to $913 a week, rather than the estimated $970 originally proposed.

The lower threshold reflects a different standard — the 40th percentile of what full-time salaried workers get paid in the lowest-wage region defined by the Census Bureau, rather than the national average. The rule uses the same standard for prospective updates.

Nevertheless, a very large initial increase from the $455 a week that’s been in place since 2004 — and, for the first time, adjustments that won’t require a new rulemaking. These will ensure that an ever-increasing number of employees doing basically the same work for only a bit more pay can’t be classified as over-time exempt.

The Labor Department says that somewhat over 4.2 million workers — 19% of those now exempt — will gain overtime protections or a raise. These are workers paid less than the new threshold.

But it another 8.9 million will benefit, its says elsewhere. The difference between them and the others, economist Jared Bernstein explains, is that they should already be getting overtime pay, but aren’t because employers have taken advantage of loose duty definitions to classify them as exempt.

They include assistant restaurant managers, as I’ve written before, and other workers designated as managers who spend most of their time doing work that requires minimal skills and no decision-making to speak of.

The Economic Policy Institute puts the number of workers directly affected at 12.5 million, saying it’s used both the Labor Department’s proposed and final rules and data from the Census Bureau’s ongoing Current Population Survey.

Both the Department’s and EPI’s impact analyses include a variety of breakouts — by gender, for example, race/ethnicity, age and highest formal education level.

They also break out the total by state (and would-be state). So we learn that roughly 11,000 more workers in the District of Columbia may have to get paid overtime — this, according to the Labor Department.

EPI estimates 29,000 — 16% of District workers, instead of 4%. The big gap here — and other differences — reflect EPI’s view that the Labor Department underestimated the number of workers who should have been receiving overtime pay, but weren’t.

One way or the other, substantially more workers — and not only in the District, of course — may get paid more. They won’t all necessarily get paid for the extra hours they put in, however.

As Bernstein suggests, employers may bump up some workers’ salaries to just above the new threshold — and then presumably use those squishy duties tests to exempt them from overtime pay. The Labor Department sees this prospect too.

Employers may instead just hire more workers so that everything that needs to get done gets done within the 40-hour per worker week. EPI estimates 120,000 new retail jobs nationwide — the same estimate another source made when Labor proposed the higher threshold.

This could make life better for some of the roughly 7.9 million workers now unemployed and actively looking for work, including about 25,300 in the District.

We simply don’t know how employers will respond. We can be pretty sure, however, that they’ll have a harder time taking advantage of workers they’ve exempted.

The Vice President of the National Association of Manufacturers, which strongly objects to the new rule, inadvertently discloses the abuse of exemptions.

Small manufacturers, she says, “cannot afford the burdens of a 99 percent salary increase for management employees” now exempt. Think how little they’re paying those employees, who’ve had to work extra hours for free.

The National Restaurant Association says basically the same thing. And it warns that restaurant owners may shift salaried employees back to paid-by-the-hour positions, suggesting that they’ve extracted extra hours and now won’t.

It also says it will support legislation to block the new rule — either directly or by denying the Labor Department funds to enforce it. It’s got some muscular allies — the National Federation of Independent Businesses, for example. And they won’t have to start from square one.

House Speaker Paul Ryan has already committed his majority to fighting the rule. Senate Majority Leader Mitch McConnell wants to block it too. But unlike Ryan, he can’t count on the votes needed.

So we can indeed celebrate –and hope for the best. Because the next administration could do away with the rule. Clearly wouldn’t if it’s Clinton’s, but ….



How Much Would DC Minimum Wage Workers Gain From $15 an Hour?

March 7, 2016

The Economic Policy Institute has answered a question long on my mind: How much are minimum wage increases actually worth when they’re phased in over time? The answer, as one would guess, is not as much as they seem because inflation erodes purchasing power.

EPI does more than confirm the hunch, however. It reports actual dollar values, using three different inflation estimates for minimum wage increases that will be on state ballots in November — and one that might be on the District of Columbia ballot.

Set aside the if and the why. Here’s what we learn about how much minimum wage workers would actually gain if voters had a chance to decide. How that if would pan out seems fairly certain.

As with one of the California proposals, they’d get a relatively big bump the first year — $2.00 more it would seem, if measured from the current rate. Inflation would take a bit of a bite, however, leaving them with somewhere between 23 cents and 47 cents less, depending on which estimate we look at.

Annual increases then get smaller, and inflation chugs on. So by 2020, the apparent $15.00 is worth somewhere between $13.76 and $13.41 in today’s dollars. In other words, what looks like an increase of nearly 43% for the District’s minimum wage workers could actually be about 15% less.

This isn’t to say that the campaign should be fighting for a significantly higher minimum wage. Nor that voters, if they can, should decide that the proposed new minimum wouldn’t make a enough of a difference to risk the job losses, cutbacks in hours, etc. that the Chamber of Commerce and its business association allies warn of.

For one thing, they always sound off when minimum wage increases are in the offing. And the alarms have thus far proved so much hot air — or mostly that.

We can’t altogether discount job losses and the like because, as economist Jared Bernstein has said, “the research doesn’t have a lot to say” about such a large minimum wage increase.

Harry Holzer, another leading labor economist, leans toward caution, but also concludes that the research on past minimum wage increases doesn’t supply grounds for a clear, reliable prediction.

We’re on surer ground when we look at the known knowns. For example, if the District’s minimum wage were $15 today, a full-time, year round worker earning that would have virtually no money left after paying the median rent for a one-bedroom apartment.

If the worker were a single mother with two children, she’d be short about $6,000 a month for basic needs, plus taxes, according to EPI’s family budget calculator. On the other hand, she’s short $800 a month more at the current minimum wage rate.

The minimum wage is one, though hardly the only reason that income inequality in the District is greater than in any state — and almost every large city, as the DC Fiscal Policy Institute recently reported.

Households in the top fifth of the income scale have, on average, 30 times the income of those in the bottom fifth, though they’ve lost a negligible amount since the Great Recession set in. Households in the middle fifths have more in real dollars now.

But those in the bottom fifth have nearly 14% less — a mere $9,300, on average. This is far less than what a full-time, minimum wage worker gets paid, clearly indicating the need for a broader range of remedies than the proposed increase.

For one thing, converting the hourly wage to full-time, year round probably overstates a family’s income because so many retail employers schedule workers only when customer traffic indicates they need them.

Looked at from these several perspectives, the $15 an hour minimum wage seems a modest proposal — a necessary, but not sufficient measure to reduce income inequality by lifting what the bottom fifth has to live on.

DCFPI, which has favored the increase in the past, has some other recommendations, including what I infer are limits on the just-in-time scheduling practices that a bill the DC Council is considering would set.

The District would still need a strong safety net — and not only for residents whose incomes now drag down the average for the bottom fifth. Some low-wage workers might lose their jobs if employers had to pay them $15 an hour — even if they regularly receive tips and can thus legally be paid as little as $2.77 now.

We simply don’t know, but we shouldn’t pretend there’s no risk. Nor should we assume that workers active in the Fight for $15 campaign and its allies do.

As Bernstein argued awhile ago, they may have weighed the potential costs and benefits and decided they’d “be more likely to come out ahead” with the large increase they’re demanding. The District as a whole, including its yawping restaurant owners would too.

Time Running Short for Updated Overtime Rule

February 22, 2016

Wrapping up his budget briefing, the Secretary of Housing and Urban Development noted that the Obama administration had only about 11 months left. “So we have to run and run and run,” he said.

Has the Labor Department gotten the message? It still hasn’t published a final rule updating federal overtime pay requirements. And it doesn’t have anything like 11 months to do so if it wants to ensure the rule gets changed.

Why the Rule Needs Updating

As you may recall, the Labor Department issued a proposed overtime rule in early July. It would replace the rule issued in 2004. That rule, among other things, set a new minimum salary for exemptions — a lower threshold, in real dollar terms, than when first updated 11 years before.

Anyone paid less than $455 per week — $23,660 a year — was entitled to one-and-a-half times that when s/he worked more than 40 hours in a workweek. Likewise anyone paid by the hour or in a job involving strictly “blue-collar” tasks.

Employers could take advantage of six diverse duties tests — some broadly defined — to classify white-collar workers earning more than the minimum as overtime-exempt.

They could, for example, classify assistant fast food restaurant managers as executives, though they spend most of their time taking orders, clearing off tables, etc. and have no authority to hire, fire or promote non-exempt crew members who do the same.

Those broad definitions reflect intensive lobbying by retail business interests and a very business-friendly Labor Secretary. They’ve not only enabled business owners to get free hours of low-skill work. For the same reason, they’ve reduced job opportunities for workers whose skills would match the tasks.

The squishy duties tests and the low salary minimum together have substantially undermined what the Fair Labor Standards Act intends — on the one hand, to “spread employment” and on the other, “to reduce overwork and its detrimental effects on the health and well-being of workers.”

Today, only about 8% of full-time salaried workers have protection from overwork. In 1995, when the threshold got its last major boost, 62% did.

What the Proposed Rule Would Do

The proposed rule wouldn’t change the duties tests, though the Labor Department invited comments on whether they were actually screening out workers who shouldn’t be overtime-exempt. It instead opted to just redraw the “bright line” for exemptions.

The rule would immediate raise the salary threshold to $50,440 a year, assuming that’s the 40th percentile of salaried workers’ earnings, as the Labor Department estimates.

The threshold would then automatically rise to keep pace with either the 40th percentile or consumer price inflation. The Department sought comments on which to choose.

One way or the other, the adjustments would prevent the erosion-by-neglect that’s denied so many workers the extra money or time for family, exercise, volunteering, etc. that entitling them to overtime pay would provide.

How many we don’t know. We do, however, know that some 5 million would immediately no longer have to work up to nearly two regular workdays for free, assuming employers comply with the rule.

Which means, among other things, that the Labor Department has the resources to enforce it. Funding for the division that enforces wages and hours rules is now at about the same level as in Fiscal Year 2012.

Why Time Is Short

The Labor Department has said it expects to publish a final overtime rule in July. Not such a long time after the end-date for comments, especially when it has nearly 300,000 to digest.

But the Department doesn’t always publish on schedule. In this case, it would best publish sooner because the longer it waits, the more it puts the final rule at risk. Here’s why.

An updated overtime rule would qualify as a “major rule,” according to a law passed back in 1996. That means Congress has 60 legislative days to review it — and can try to kill it by passing a resolution of disapproval.

Note that the clock runs only when Congress has scheduled days for members to do the business we thought we elected them for. Not many of those days left in this session, what with members given ample time for their first order of business, i.e., getting reelected, plus an enviable amount of paid time off for the holidays thereafter.

Unlike most bills, a resolution to disapprove requires only a majority to pass in the Senate — the same as what’s needed to pass any bill in the House. So Republicans could send a resolution to the President even if no Democrats voted for it.

The President would surely veto it, however, And Republicans don’t have the two-thirds super-majorities to override a veto.

All well enough and good if the final rule gets to Congress soon. If it doesn’t, then Republican leaders can delay the vote until the next Congress — and the next President — are in office. Who knows how this strange election season will end?

And who hasn’t noticed how Republican Senate leaders have already seized on the upcoming election to argue against the President’s calling for an up-or-down vote on a decision that will have wide-ranging effects, including on our nation’s workforce?

How to Counter Pressures for Delay

We didn’t need this new, unexpected clash to foresee a potential strategy aimed at blocking overtime rule reform. More than 100 members of Congress, virtually all Republicans, had already asked the Secretary of Labor to “reconsider moving forward with … [the] rule as drafted” — or one gathers, anything at all.

So a coalition of national worker and family advocacy organizations urges us to help create a sense of urgency in the Labor Department, through a brief note to the President. Seems like the best we can do right now to help over-worked, under-paid workers — and some without any or enough work too.

Childcare Workers Underpaid, While Families Face High Care Costs

November 9, 2015

A recent blitz of social media communications about how little childcare workers get paid. The engine behind them is Fight for 15 —  a campaign for a $15 an hour minimum wage, originally by and for fast food workers, backed by SEIU (the Service Employees International Union).

Childcare workers joined last March, but they’ve become more vocal — or more precisely, had their voices channeled — only in the last month or so, as a lead up to the Fight for 15 strike on Veterans Day.

The Economic Policy Institute, which has strong organized labor ties, published a report last week showing, from various perspectives, how relatively low childcare workers’ wages are — and predictable consequences.

The report raises larger issues. Some details on the wages first, then a segue into a couple of those.

The median wage for childcare workers is $10.31 an hour — 39.3% less than for all other workers. This, in fact, may understate the difference because the median doesn’t include childcare workers who have no official employer but themselves.

What’s more telling is the pay gap for workers who’ve got at least some college education, as nearly 61% of childcare workers do.

Those with less than a four-year degree get paid a median of $4.88 an hour less than their counterparts in other occupations. For those with a bachelors degree, the per-hour median is $10.78 (44.8%) less.

The pay gap doesn’t simply reflect other demographic differences commonly linked to wage rates, e.g., gender, race/ethnicity, age. The “child care penalty,” as EPI calls it, remains when they’re factored in.

Not surprisingly, childcare workers have a higher poverty rate than all other workers combined — 14.7%, as compared to 6.7%.

The “penalty” doubles for childcare workers with incomes at or below 200% of the official poverty line — a commonly used measure because the line reflects the Census Bureau’s unrealistically low poverty thresholds.

EPI turns to its family budget calculator. The maps its report includes show that the median childcare worker wage falls short of what a single person, living alone needs for basic living expenses in virtually every community in the country.

One of those basic living costs, though not for the single person, is child care, of course. Center-based care for either an infant or a four-year-old costs far more than what the typical childcare worker can afford.

Such care for an infant in the District of Columbia would eat up 89.7% of the childcare worker’s wage — and only 17% less for a four-year-old.

What this means, of course, is no center-based child care unless heavily subsidized — and not only in the District. It often isn’t, especially for parents whose incomes put them above the extremely low cut-offs for states’ Temporary Assistance for Needy Families programs.

The end result for a childcare worker can be no earned income because she’s got to quit her job, as one featured in a ThinkProgress story did when her youngest was put on a subsidy waiting list.

The subsidy did come through. It’s a piece of one of those larger issues — the fact that we taxpayers subsidize employers that pay very low wages because workers perforce turn to public benefits.

A study put hard numbers on this cost-shift in the fast food sector several years ago. Researchers at the University of California, Berkeley, including several from the fast food team, have done the same for childcare workers.

Of those who worked, at least part-time and for at least somewhat over half the year, 46% received benefits from at least one of five “public support” programs — Medicaid, the Children’s Health Insurance Program, SNAP (the food stamp program), TANF and the Earned Income Tax Credit.

Costs of these supports totaled, on average, $2.4 billion a year — about 55% of it for Medicaid and CHIP, since healthcare costs are disproportionately high. But average yearly costs of the EITC (presumably the refundable part) and SNAP totaled more than $1 billion.

“Child care workers’ job quality does not seem to be highly valued in today’s economy,” EPI remarks. Somewhat of an understatement when we consider not only their typically low pay, but the notably few with employer-sponsored benefits, e.g., health insurance.

This too seems a piece of a larger issue. Anne Marie Slaughter argues that we don’t value caregiving. She’s referring to a “workplace culture” that discourages or denies time off for family responsibilities — and to public policies that have thus far done little about this.

But it also applies to wages for professionals in what Professor Cheryl Carleton refers to as “the caring industry,” e.g., teachers, nurses, home health aides.” The fact that they’re historically — and still predominately — “female occupations” goes far to explain this.

And probably wages for childcare workers too, since all but a small fraction are women. But we do, in a way, value their work. Otherwise, parents would just park their kids any old place.

So why do we have childcare workers who’ve got to campaign for $15 an hour — less than 200% of the federal poverty line for a three-person family, assuming (as we shouldn’t) full-time, year round work?

The issue here is somewhat different than for fast food workers. Not that they don’t deserve a decent wage too. But most of the skills their work requires are gained on the job — not skills they bring with them from postsecondary education, specialized training or prior experience.

And fast food restaurant owners claim that they’ve got to control labor costs to keep prices low because they’ll otherwise lose customers. Not letting them off the hook, mind you, but customers do balk at price increases. And owners seem not to have a profit margin they can whittle down much — not, at least, if they’re franchisees of the major chains.

By contrast, childcare costs are dauntingly high — and rising. Professor Deborah Phillips, who worked on the Berkeley study, says “we’ve no idea” where the money is going, since obviously not to wages. Perhaps to other costs, as spokespersons for childcare centers say.

Regardless, we’ve got two big problems — unaffordable child care and a great many childcare workers who can’t afford basic living costs, child care included.

We can’t look to the private market to solve either, I think. As EPI concludes, we’ll need public policies.

And we should have them because they’d serve vital public interests—supporting and suitably rewarding valuable work, ensuring that all our nation’s children have the daily care and experiences that give them a good start in life and more.



Benefits of Overtime Rule Reform Not Only More Jobs or More Pay

July 27, 2015

My post on the Obama administration’s proposed overtime rule reform focused mainly on how it could benefit low-wage workers, even though the current rule already entitles most of them to overtime pay. For them, I argued, the story is more jobs — or perhaps in some cases, more full-time jobs.

Employers would create these jobs, rather than pay one-and-a-half times the salary rate for workers they could no longer classify as overtime-exempt. How those workers view the new rule deserves some attention too.

TalkPoverty.org profiles a woman who works for a national auto supply chain. She’s a manager and travels around, remodeling stores. She puts in 50 to 70 hours a week, but gets paid just the same as if she worked no more than 40 — just over $40,000 a year.

“I’m just so beat down,” she says. “I’m 100 pounds heavier than when I started the job.” The post nevertheless focuses on what she’d do if paid for her extra hours, as the proposed rule would require.

Well, she wants the money — needs it actually because she’s defaulting on loans her daughter took out to pay for college.

Her children are all grown now, and she apparently doesn’t have a husband or partner to come home to. She still, I suppose, has personal relationships and interests outside of work — or wishes she did.

But it seems she’d prefer the grueling scheduling — and the aforementioned impacts on her health — to adjusted duties, which might be what her employer chooses instead of paying her roughly $30,000 more a year for overtime.

Yet many workers, I think, will welcome the new overtime rule because it will mean fewer hours on the job — and lower out-of-pocket costs too. Consider what it would mean for our auto supply chain manager if her five children still lived at home.

She’d have to pay someone to care for them in the late afternoon and early evening yours, assuming they were all old for school. After-school care alone costs at least $1,100 or so — and as much as about $8,200 — per child, Child Care America reports.

And then there’d be the costs of having someone pick the kids up and care for them till next morning when she was out of town.

Alternatively, she might orchestrate care by friends, relatives and/or neighbors — generally a stressful juggling exercise. Can be guilt-ridden too, for reasons I don’t suppose I need to spell out.

Stress and guilt are both likely, I think, regardless of children, especially when overtime is unpredictable and mandatory. At least one in five workers who’d become non-exempt under the proposed rule can’t refuse to work extra hours if they want to keep their jobs. An even higher portion for those in the auto supply chain manager’s salary bracket.

These are the sorts of things that lead another woman to say that the new overtime rule “would have made everyone a lot happier in their job” if it had been in effect when she also was working as many as 70 hours a week keeping a small, short-staffed dollar store running.

Happiness in this case would have resulted from her employer’s keeping overtime in check, rather than shell out thousands of dollars more than it would have cost to have enough other workers for the low-skill tasks she had to shoulder.

We’re going to hear more about work/life balance, it seems. Jeb Bush has already set off fireworks with his remark that Americans will have to work longer hours for the economy to grow at the rate he’s promised. He’s since walked it back, but not altogether persuasively.

Clinton’s tack on growth includes, among other things, policies that would draw more women into the workforce. She alludes to higher — and equal — wages.

She also cites policies that would enable women to work “without worrying every day about how they are going to take care of their children or … a family member who gets sick” — mandatory paid sick and family leave, affordable child care and “fair scheduling.”

The last apparently refers to schedules workers know well in advance and can count on, rather than the irregular, on-and-off hours that make life so difficult for many employed by restaurants and other retail businesses.

Clinton mentions the proposed overtime rule, but as a fair pay issue, i.e., a measure to increase income. I think it also belongs in the “family-friendly” category.

I understand that some workers want — and need — all the extra income the new rule might enable them to earn. But others would welcome relief from ongoing compulsory overtime.

I know I would have. And I didn’t have children to arrange care for — and feel guilty about because I wasn’t there to help with homework, cheer at the dance recital or soccer game, etc.

The Labor Department would like to know how you who’d become eligible for overtime view the proposed reform. Likewise those of you who would have been eligible if it had been in place before.

It invites us to comment on the proposal. And having eyeballed the comments posted thus far, I’ll tell you those business associations whose gloom-and-doom predictions I earlier cited are rallying their members.

Those who support the proposal can also sign on to a petition the Economic Policy Institute and the Center for American Progress Action Fund have launched. Signers can add a personal story about how the reform would help them.

And I’d be remiss if I didn’t note that the National Partnership for Women and Families has its own petition, calling specifically for a rule “finalized as is,” i.e., not watered down to placate the business interests that want no rule change at all.

Go for it!



What Would Overtime Reform Mean for Low-Wage Workers?

July 16, 2015

I’ve been thinking about the Obama administration’s proposed overtime rule reform — specifically, how it would affect low-wage workers, if at all.

Short answer is that it wouldn’t affect them directly. The main reason is that most are paid by the hour, which automatically qualifies them for one-and-a-half times their regular wage if they work more than 40 hours in a week. Not that they always get paid for overtime, mind you. But that’s a separate issue.

The proposed rule also wouldn’t directly affect workers whose take-home pay reflects a salary, rather than an hourly rate, if it’s no more than $23,660 — less than would lift a family of four above the federal poverty line. These poor and near-poor workers are already entitled to overtime pay.

Nor should the proposal affect workers who get paid more, but whose “primary duties” don’t meet specific tests, e.g., involve executive functions or exercising “discretion and independent judgment” on “matters of significance” to the overall management or business of the operation.

Workers whose primary duties don’t meet any of the tests are supposed to get overtime pay under the current rule. Many don’t, however, because the tests enable employers to exempt workers whom no reasonable person would consider executives or administrators with the scope and independence the test seems to call for.

The license employers have to exempt large portions of their white-collar workforce is not an unintended consequence of the rulemaking process.

I recall well when the Bush administration’s Labor Department moved to update the overtime rule. Fast food restaurant companies — through their associations and directly behind closed doors — lobbied hard for broad exemption criteria, unrelated to the amount of time a worker spent on those primary duties. Other business interests did the same.

They got what they wanted. So, for example, an assistant restaurant manager who spends most of her time pitching in where crew members can’t keep up could get no extra pay for doing the same things they do, but for 50 or 60 hours a week if she merely makes sure that at least two of them do what they’re supposed to and tells her higher-ups whom she thinks they should hire, fire and/or promote.

The proposed rule doesn’t alter the duties tests, though the Labor Department considered doing that and asks for comments on whether they “work as intended.”

Instead, it simply raises the pay threshold to what it would have been if it had kept pace with consumer price inflation during the last 40 years — probably $50,400 when the final rule becomes effective. The new threshold would then rise so that it continued to correspond to the 40th percentile of all weekly wages.

So the proposed rule might seem irrelevant to low-wage workers, except those whose salaries are at or barely above the current threshold. But it’s likely to affect them — just as the current rule does, but in the opposite way.

Basically, the current version enables employers to hire fewer workers than they’d otherwise need for routine tasks like cleaning floors, restocking shelves and checking on backroom inventories by shifting those tasks to “executive” staff, who have to do at least some of them for free.

Today, only about 7.6% of retail supervisors qualify for overtime, based on their salaries, the Economic Policy Institute has reported. The proposed rule would cover somewhat over 56% — and roughly 79.5% of first-line restaurant supervisors like the overworked, underpaid assistant manager.

Hard for me to see how this would not induce employers to hire more workers for those routine tasks — or in some cases, convert part-time to full-time jobs.

That’s a far cry from what the associations that lobby on behalf of affected businesses say. The proposed rule would have “a significant job-killing effect,” the National Retail Federation warns.

It also claims that the proposed rule would “force” companies to downgrade positions and to rely more on part-time, entry-level workers — halfway acknowledging, without intending to, that they’ve been relying on exempt employees to do what entry-level workers could.

The Chamber of Commerce predicts something similar — lost benefits, flexibility, status and opportunities. Here again, we’re given to understand that employers will respond by cutting back on lower-level salaries positions they’ve classified as exempt.

The Chamber also alleges harms to small businesses in particular. This, I take it, is because we’re supposed to have a soft spot in our hearts for mom and pop operations and those risk-taking entrepreneurs oft-heralded (somewhat misleadingly) as our leading job creators.

If these doomsday prophecies sound familiar, that’s because they’re very similar to what the associations and some of their members say about any and all minimum wage increases, as well as other policy changes that would make life better for low-wage workers, e.g., mandatory paid sick leave.

We’ve had minimum wage increases, of course. Numerous studies have found little or no effect on employment. In the relatively few states and cities that require paid sick leave, employers seem to be doing just fine.

Now, we’re a long way from a final rule that updates federal overtime requirements. What the Department of Labor ultimately issues could look quite different. How businesses will respond is simply unknowable, association warnings notwithstanding.

We can guess, however, that they’ll respond in different ways. They may reduce salaries so as to pay non-exempt workers the same total amount, once estimated time-and-a-half is factored in. Probably not, however, for workers already on board.

They may, as an NRF-commissioned study hypothesizes, cut bonuses and benefits, risking the loss of their most qualified workers and prospects, unless all their competitors follow suit.

They may instead make no such adjustments. They’d then probably put tighter controls on overtime. Some could, I suppose, boost worker productivity such that more gets done during a 40-hour work week.

Only so much more they can do on that score, however, especially when tasks can’t be automated. If they can be, they probably will be anyway, so long as that doesn’t bust the budget.

But I’m still inclined to think that a goodly number of employers will hire more workers to compensate for the loss of unpaid labor. The overtime rule update will thus be a job creator. Happy to see that at least one labor economist thinks so too.




What Raise the Wage Would (and Might) Do at State and Local Levels

May 11, 2015

As I said the other day, Senator Patty Murray and Congressman Bobby Scott have introduced an ambitious bill to at long last raise the federal minimum wage — and at longer last, do away with the sub-minimum tip credit wage.

One might wonder why we need the bill when so many states, plus some local governments have already raised their minimums. The answer lies in part in the higher and uniform wage floor the Murray-Scott Raise the Wage bill would set.

The other part — more speculative — has to do with how the bill could affect further state and local minimum wage initiatives. Assuming, as seems reasonable, that Congress won’t pass it, we’re likely to see such initiatives as we approach the sixth year since a federal minimum wage increase.

And the more we see, the more we could see the bar raised for employers’ quasi-voluntary initiatives to raise the wage floor for their lowest-paid workers. “Quasi” because they’re clearly responding to well-publicized campaigns they rightly view as threats to their brands — and bottom lines.

Direct Effects on State and Local Minimum Wage Rates

As in the past, state and local governments have grown increasingly impatient at the federal government’s failure to raise the minimum wage. Fourteen states and the District of Columbia passed their own increases last year.

None of them, however, now mandates a wage as high as $12 an hour, though minimums in a few major cities will eventually exceed it. And only four of the new state laws, plus the District’s provide for annual cost-of-living adjustments once their new rates are fully phased in.

Eyeballing the rates they’ve set and the full phase-in dates, I doubt that any, except perhaps the District’s will match $12 in 2020. More importantly, we still have 19 states that peg their minimum wage to the federal or have no minimum wage law of their own.

And only seven states require employers to pay their workers the full minimum wage, even those who often earn tips. Not that we haven’t seen efforts to eliminate tip credit wages in other states — and in the District.

All steamrollered by the National Restaurant Association’s state affiliates, allied groups purporting to represent small businesses and the restaurant industry’s hired gun, the Employment Policies Institute (not to be confused with the Economic Policy Institute).

What the Rates Tell Us

The varying minimum wage rates themselves tell us a couple of things. First — and most obviously — workers in some states will be stuck with the current federal minimum and significantly lower sub-minimum unless the federal law is changes.

Second, also obviously, many millions of workers in most, if not all other states would also get paid more under the Murray-Scott bill. As I mentioned earlier, the Economic Policy Institute estimates 37.7 million by 2020, not counting workers paid the $2.13 federal tip credit wage — or as in the District, a slightly higher sub-minimum.

How Raise the Wage Could Raise Wages Without Changing Federal Law

Much as we might wish, Congress won’t raise wages for those 37.7 million workers and the additional uncounted tip credit workers — not at least, until new elections dramatically shift the party balance. Raise the Wage could nevertheless have near-term, real-world effects.

These would arise from the way the bill may alter the framework within which policymakers and we, the voter/consumer public, assess current and reasonable minimum wages.

Essentially, the proposed minimum could become a new reference point, of sorts, for initiatives to raise state and local minimum wages. The proposed tip credit wage phase-out might become a reference point too.

We already see how the fast-food worker strikes — and more recently, some broader strikes — have made $15 an hour seem just and reasonable for more than an outlier city like Seattle.

The movers and shakers behind San Francisco’s recent ballot measure didn’t just pull their $15 an hour minimum out of a hat. Nor, I think, was the overwhelming voter support for the measure unrelated to the fact that $15 no longer seems like mere pie in the sky.

In fact, it’s made $12 an hour five years from now seem like a quite modest proposal — as indeed, it is. Recall that $12 in 2020 won’t be worth as much as it is today. If it were effective today, a full-time, year round minimum wage worker’s take-home pay would still be less than needed to lift a four-person family above the poverty line.

So Raise the Wage is by no means the be-all-and-end-all. Nor would the sponsors and many cosponsors say otherwise. But it would ease the budget crunch for poor and near-poor working families, narrow the yawning gap between them and the highest earns — and perhaps, as some who ought to know say, also prove a benefit to employers who’d have to pay it.

As I’ve suggested, it may do all of these good things in the not-distant future, even if, as expected, the Republican leaders in Congress let it die because they want to spare their members what could be a troublesome vote.

But we won’t see those good things everywhere and for everyone without changes in the federal law.


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