Personal experience and research tell me that many U.S. businesses rob their hardest-working employees of overtime pay by dubiously calling them "executives" or "professionals." President Obama says he wants to fix the problem, and he has the power to do so. How this issue plays out will be a test of his will, of his word, and of his ability to fully execute the powers of the presidency.
Can he lead or just give lip service?
At issue are the overtime provisions of the Fair Labor Standards Act, which Congress originally passed in 1938. Each president interprets and executes the law differently. For instance, President Bush in 2004 gave businesses more latitude to classify employees as white-collar workers exempt from overtime pay. Unions objected.
Now it's Obama's turn. According to The New York Times, he has ordered the Labor Department to overhaul its regulations under the 1938 law to:
- Significantly increase the salary level below which workers automatically qualify for overtime. Currently, employers cannot deny time-and-a-half pay for any salaried worker who makes less than $455 per week.
- Require that employees perform a minimum percentage of "executive" work before they can be exempted from overtime pay. Currently, a business needs only to declare that a worker's primary responsibility is executive, such as overseeing a cleanup crew. In other words, the playing field is tilted toward the employer who has a financial incentive to declare virtually anybody an overtime-exempt "professional" or "executive."
Democratic economists Jared Bernstein and Ross Eisenbrey urged the administration last year to raise the salary threshold for overtime pay to $984 a week, making as many as 5 million more workers eligible. (Disclosure: I play pickup basketball with Bernstein and Eisenbrey, and consider them both friends.)
As the New York Times story by Michael Shear and Steven Greenhouse makes clear, it's too soon for overtime proponents to celebrate:
The proposed new regulations would increase the number of people who qualify for overtime and continue Mr. Obama's fight against what he says is a crisis of economic inequality in the country. Changes to the regulations will be subject to public comment before final approval by the Labor Department, and it is possible that strong opposition could cause Mr. Obama to scale back his proposal.
The proposal is certain to be strongly opposed by the U.S. Chamber of Commerce and other business interests, including some who donate money to Democratic causes. For all its talk of income equality, the White House covets the deep pockets of lobbyists, bankers, CEOs, and other gilded elites. Caving is always a possibility.
In addition, Obama and his team have not been adept at managing the federal bureaucracy or toggling the levers of power. The president's vaunted "pen and phone" campaign promises a smarter use of executive authority, but so far most of the muscle-flexing is reserved for delaying and watering down Obamacare. Fumbling the ball is not out of the question.
In a sign of its flexibility, the White House has not embraced the $984 per week mark put forward by the Democratic economists. It would not be out of form for Obama to promise a big change, grab a Times headline, and walk away from meaningful reform
Unlike some other Democratic ideas, Republicans can't stretch the truth far enough to credibly call this idea socialism or welfare. It's as American as apple pie: If you work hard, you get paid for it—and that's not happening now. As The Times put it:
Since the mid-1980s, corporate profits have soared, reaching a post-World War II record as a share of economic output. The profits of the companies in the Standard & Poor's 500 have doubled since the recession ended in June 2009, but wages have stagnated for a vast majority of workers in the same period. Recently, workers' wages fell close to an all-time low as a share of the economy.
In 2012, the share of the gross domestic income that went to workers fell to 42.6 percent, the lowest on record.
None of this excuses Obama from his responsibility to sell the American people on the rule change—what he's doing and why. The worst thing Obama could do about overtime pay is let the status quo stand. The second worst thing he could do is change the rule without building support for it. Congress could reverse the regulation, especially if the Republicans win the Senate in November. So could the next president.
Let's hope the White House works overtime to get this right.