Is Obama Giving Lip Service or Showing Leadership on Overtime Pay?

Stopgap: Obama signs two-week CR.
National Journal
March 12, 2014, 5:29 a.m.

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.

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