Obama’s Incredibly Underwhelming Executive Orders

Recent White House moves to help workers may be well-intentioned, but they will achieve little.

US President Barack Obama pauses while speaking to the Democratic National Committee at the Capital Hilton February 28, 2014 in Washington, DC. Obama spoke about the 2014 midterm elections. 
National Journal
Nancy Cook
March 20, 2014, 11:35 a.m.

Pres­id­ent Obama tried to boost the for­tunes of the as­pir­ing middle class late last week by is­su­ing an ex­ec­ut­ive or­der to re­write reg­u­la­tions that dic­tate which type of work­ers can col­lect over­time pay. It was a vali­ant ef­fort on the part of the ad­min­is­tra­tion — and the pres­id­ent’s second, re­cent at­tempt to prod the eco­nomy to work bet­ter for a wider swath of people, not just the uber-rich

Yet over the next year, these moves will help only a frac­tion of work­ing Amer­ic­ans. One ex­ec­ut­ive or­der re­quires com­pan­ies with new fed­er­al con­tracts to pay work­ers un­der those con­tracts a min­im­um of $10.10 per hour; the oth­er or­der would re­write the rules for over­time pay and en­sure that a great­er num­ber of white-col­lar pro­fes­sion­als can col­lect ex­tra money for time worked over 40 hours a week. Yet these ex­ec­ut­ive or­ders will do little to ad­dress the broad­er eco­nom­ic chal­lenges the coun­try faces like stag­nant wages or the near-im­possible job mar­ket for the long-term un­em­ployed. (Does any­one re­mem­ber them, those 3.8 mil­lion Amer­ic­ans out of work for six months or more?)

Obama’s not en­tirely to blame for small-bore policies that fail to pro­duce sig­ni­fic­ant change. After all, Con­gress still con­trols the levers of gov­ern­ment spend­ing, and we know how well the White House and Cap­it­ol Hill get along. With no break­throughs in this hy­per-par­tis­an en­vir­on­ment, though, this is where we find ourselves — star­ing dumb­foun­ded at a yet-to-re­cov­er labor mar­ket and lean­ing on mar­gin­al moves to prop it up.

Here’s why Obama’s re­cent ex­ec­ut­ive or­ders on over­time pay and in­creas­ing the min­im­um wage for fed­er­al con­tract­ors will not take us far enough to im­prove the lives of the ma­jor­ity of work­ing Amer­ic­ans:

Small im­pact. It’s tough to gauge the po­ten­tial ef­fect of the Obama’s new over­time rules be­cause the Labor De­part­ment still needs to re­write them — a pro­cess that an agency spokes­man says could take the bulk of 2014. (“We ex­pect that the de­part­ment will then pub­lish a pro­pos­al for pub­lic com­ment later this year,” says the Labor De­part­ment’s Jason Surbey.) That means the pro­pos­al to change the rules, not even the policy it­self, won’t come out un­til late 2014.

Still, it’s pos­sible to do some back-of-the-en­vel­ope es­tim­ates on the num­ber of work­ers this could help. The Eco­nom­ic Policy In­sti­tute re­cently re­leased a de­tailed pa­per that ar­gues the Labor De­part­ment should make eli­gible for over­time work­ers who earn $970 dol­lars a week or less. This would be a ma­jor bump up from the cur­rent law’s threshold of $455 dol­lars a week. The pa­per’s au­thors (in­clud­ing Jared Bern­stein, the former chief eco­nom­ist to Vice Pres­id­ent Joe Biden) es­tim­ate this would lift the wages of 5 mil­lion to 10 mil­lion work­ers. Mean­while, in­creas­ing the min­im­um wage for fed­er­al con­tract­ors could help up to a couple of thou­sand work­ers.

At most, these two ex­ec­ut­ive or­ders, if fully en­forced, will be­ne­fit roughly 10 mil­lion work­ing Amer­ic­ans. For con­text, as of 2012, there were 103 mil­lion Amer­ic­ans work­ing full-time and year-round, ac­cord­ing to the latest data from the U.S. Census Bur­eau. That’s not the worst stat, but it also not go­ing to en­tirely make up for stag­nant wages and a labor mar­ket that con­tin­ues to work bet­ter for com­pan­ies than for Amer­ic­an work­ers.

Noth­ing will hap­pen right away. The oth­er rub about the two ex­ec­ut­ive or­ders is that they won’t go in­to ef­fect right away, prob­ably not even be­fore the 2014 midterm elec­tions. If the Labor De­part­ment is not plan­ning to even re­lease a pro­pos­al of its over­time pay plans un­til later this year, then we’re po­ten­tially look­ing at very late 2014, even 2015 as a time frame for when this ac­tu­ally be­comes policy. The same goes for the in­crease in min­im­um wage for fed­er­al con­tract­ors. That or­der only ap­plies to new con­tracts is­sued by the gov­ern­ment mov­ing for­ward.

En­force­ment. Both ex­ec­ut­ive or­ders re­quire the Labor De­part­ment to en­force them, and it’s un­clear if the fed­er­al agency has the man­power. Can it keep tabs on all fu­ture fed­er­al con­tract­ors to guar­an­tee they pay the high­er min­im­um wage of $10.10? And what about en­for­cing the more nu­anced over­time rules, which de­pend on the clas­si­fic­a­tion of the work­er, as well as the amount of money he or she makes per week? “That’s mil­lions of small es­tab­lish­ments that will be ef­fected by this. They will be hard to mon­it­or,” says Harry Holzer, a pro­fess­or of pub­lic policy at Geor­getown Uni­versity and former chief eco­nom­ist at Labor. An­ec­dot­ally, we’re already see­ing re­ports that some work­ers who live in states that raised the min­im­um wage on Jan. 1 are not see­ing those ex­tra earn­ings show up their paychecks. The new rules could fol­low a sim­il­ar script.

The lengthy eco­nomy to-do list re­mains long. Both re­cent ex­ec­ut­ive or­ders on work­ers’ wages show that Obama is try­ing to achieve some last­ing re­forms for Amer­ic­an work­ers, still battered by the re­ces­sion. But these policies score polit­ic­al points for Demo­crats more than they spur eco­nom­ic growth. The fed­er­al gov­ern­ment still needs to fig­ure out a way to en­sure that the eco­nomy ex­pands at a faster clip. We need more jobs to be cre­ated, not just low-wage ones — and more press­ingly, we need to de­vel­op an agenda to re­con­nect the mil­lions of out-of-work and un­der­em­ployed Amer­ic­ans to the labor mar­ket. “The pres­id­ent pro­posed many ideas in 2011, like tax cred­its, pub­lic ser­vice em­ploy­ment, and in­fra­struc­ture pro­jects, that were nev­er en­acted but would have helped change the job mar­ket,” Holzer adds. “What you need is a much tight­er labor mar­ket.” Un­for­tu­nately, those are the big­ger pic­ture ques­tions that ex­ec­ut­ive or­ders like these simply do not tackle.

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