Overtime Pay Is the Minimum Wage for the Middle Class

 

The Department of Labor just proposed raising the overtime threshold from $23,600 a year to $50,440, and from the fearful squawks coming from the business lobby you’d think the sky was falling. But all this trickle-down scare-talk about job-killing regulations and unintended economic consequences is just that — trickle-down scare talk — without an ounce of empirical data to back it up.

We call it: Chicken Little Economics.

In fact, far from the end of the world, middle-class Americans never did better than when the overtime threshold — the annual salary below which workers are automatically entitled to time-and-a-half overtime pay — was at its peak. A half-century ago, more than 60 percent of salaried workers qualified for overtime pay. But after 40 years in which the threshold has been allowed to steadily erode, only about 8 percent do. If you feel like you’re working longer hours for less money than your parents did, it’s probably because you are.

Today, if you’re salaried and earn more than $23,600 dollars a year, you don’t automatically qualify for overtime: that means every extra hour you work, you work for free. But at the Obama administration’s proposed new threshold, everyone earning a salary of $50,440 a year or less would be eligible to collect time-and-a-half pay for every hour worked over 40 hours a week. That would add nearly 5 million more workers to the numbers eligible, substantially increasing both middle-class incomes and employment. It’s not as high as the $69,000 threshold it would take to return to 1975 levels, but it’s a courageous step in the right direction. It’s like a minimum wage hike for the middle class.

Everybody knows Americans are overworked. A recent Gallup poll found that salaried Americans now report working an average of 47 hours a week — not the supposedly standard 40 — while 18 percent of Americans report working more than 60 hours a week. Indeed, overtime pay has become such a rarity that many Americans don’t even realize that the majority of salaried workers were once eligible. We just keep working longer and harder. And ironically, the longer and harder we work, the more we weaken the labor market, weakening our own bargaining power in the process. That helps explain why over the last 30 years, corporate profits have doubled from about 6% of GDP to about 12%, while wages have fallen by almost exactly the same amount. The erosion of overtime and other labor protections is one of the main factors leading to this worsening inequality. But a higher threshold would help reverse this trend.

Under the new salary threshold, employers would have a choice: They could either pay you time-and-half for your extra hours worked, or they could hire more workers at the standard rate to fill your previously unpaid hours. The former would put more money into your pockets. The latter would put more leisure time at your disposal while directly adding more jobs. And either would be great for workers and great for boosting economic growth.

Lower- and middle-income workers don’t stash their earnings in offshore accounts the way CEOs do — the more they’re paid the more they spend on goods and services. When workers have more money, businesses have more customers; and when businesses have more customers, they hire more workers. Whether through an increase in consumer demand or through a reduction in unpaid hours, a higher overtime threshold would increase total employment, tightening the labor market and driving up real wages for the first time since the late 1990s.

Of course, conservative pundits and politicians will attempt to preserve the status quo by warning that a return to more reasonable overtime standards would somehow cripple our economy, hurting the exact same workers we intend to help. But that’s what they always warn about every regulation — from the minimum wage, to Obamacare, to child labor laws. Yet it never turns out to be true. And trickle-down economics looks more like Chicken Little Economics with every passing day.

Americans Largely In Favor of SCOTUS Obamacare, Same-Sex Marriage Rulings

The steps of the Supreme Court. (From supremecourt.gov.)

The steps of the Supreme Court. (From supremecourt.gov.)


The first public opinion polls are coming in after last week’s landmark Supreme Court decisions, and they’re decisive.

According to a new CNN/ORC poll, 63% support the Court’s ruling upholding government assistance for lower-income Americans buying health insurance through both state-operated and federally-run health insurance exchanges. Slightly fewer, 59%, say they back the ruling which made same-sex marriages legal in all 50 states.

Unsurprisingly, Republicans oppose both decisions (54 percent oppose the Obamacare decision and 59 percent oppose the gay marriage ruling) but Democrats and independents are largely in favor of them. CNN reports that 63 percent of all independents support both rulings.

Americans instinctively understand that the more people are allowed to participate, the healthier we are as a nation. Excluding LGBT* couples from marriage makes no sense on an intellectual level, it makes no sense on an economic level—the Williams Institute estimated that same-sex marriage might have generated 2.6 billion dollars in local economies by the time it was legalized in all 50 states—and just on a basic human level, it’s unacceptable. And even setting aside the compelling moral arguments, a society in which a large portion of the population doesn’t have access to basic health care is a society that’s not maximizing its potential.

Happily, Americans recognize that we don’t live in a world in which we have to decide between doing the right thing and making America a better place for generations to come. They’re one and the same. Inclusivity is good for everyone.

Daily Clips: June 30th, 2015

OBAMA RAISES THE OVERTIME THRESHOLD: 

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Yes, indeed, it is happening. Politico reports:

President Barack Obama will this week release a long-awaited overtime rule aimed at raising wages for 5 million people as soon as 2016, according to sources familiar with the plans.

The proposed rule will more than double the salary level under which virtually all workers qualify for overtime pay whenever they work more than 40 hours in any given week. That threshold, now $23,660, will rise to $50,440.

In the words of Uncle Joe Biden, “this is a big f***ing deal.” President Obama has re-established a key labor standard in the 21st century, one which had only been updated once (yes, once) since 1975. As Paul Constant wrote yesterday, “this is huge news for the middle class.”

Marriage Equality & the Modern Social Revolution: As I noted after the SCOTUS decision, we are witnessing a time of rapid change. Jonathan Chait sees this same pattern, arguing:

A great deal has happened in a very short time. America elected its first black president, and is likely to follow that by electing its first female one. Obama appointed two women to the Supreme Court, including the first Latina justice, ended the ban on openly gay military service, and carefully nudged along the groundswell of support for marriage equality.

These changes in our society are not unprecedented – the real uniqueness of this moment is the truncated periods of deliberation over these issues. Just think about the Confederate Flag! Last week, Jeb! Bush wasn’t even willing to admit that it was a racist symbol, but now suddenly he’s had a change of heart! The times they are a (quickly) changin’. It’s going to be hard for Republicans (or reluctant Democrats) to keep up with the blistering pace of modern society.

Obama’s approval rating grows after a memorable week: What a week it has been for President Obama – and it just got a little better! A new CNN/ORC poll shows that for the first time in over two years, half of Americans approve of the way Obama is handling the presidency.

Washington State is a great place to work: Business Insider determines which states are the best and worst to make a living in. They base their data on five factors: average wages, state tax rates, cost of living, unemployment rates, and incidents of workplace injuries. Check out their graph below:

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Obama Administration to Expand Overtime Eligibility to “the Equivalent of a $50,440 Annual Salary”

Overworked and underpaid? The Obama Administration wants to help. (Image courtesy of marcolm at FreeDigitalPhotos.net.)

Overworked and underpaid? The Obama Administration wants to help. (Image courtesy of marcolm at FreeDigitalPhotos.net.)

Mike Dorning at Bloomberg writes:

The Obama administration plans to raise the wages of millions of Americans who work more than 40 hours a week by requiring their employers to pay them overtime.
The Department of Labor will announce as soon as Tuesday a draft regulation to increase the minimum salary for exempting workers from a federal overtime requirements to $970 a week in 2016, the equivalent of a $50,440 annual salary, said an administration official, who asked for anonymity because the plan hasn’t been officially announced.

This is huge news for the middle class. If you want to read a primer about why an increased overtime threshold is so important, you can’t do any better than Nick Hanauer’s Politico Magazine piece, “Whatever Happened to Overtime?”

Also, prepare yourself for an endless barrage of conservative whining about how this is going to hurt the job creators (blessed be their name). We’ll be discussing why this argument is disingenuous and untruthful in the weeks to come here on Civic Skunk Works. For now, though, let’s celebrate!

Now Conservatives Want to Wait and See on the $15 Minimum Wage

yeswereopenOver at the Big Picture Blog, our friend Invictus highlights the problem with conservatives on Seattle’s minimum wage hike: now that the sky has not fallen, now that business license applications for restaurants in Seattle continue to climb, critics of the increase are kicking the can down the road.

One such critic told Invictus on Twitter that everyone should “reserve judgement on the health of the industry when it hits 15” and that “at 11 [dollars an hour] places haven’t closed ..let’s see what another 4 dollars will do ..that’s all I’m saying …” The same people who wrote celebratory posts praising a (debunked) story about Seattle-area restaurant closures are now claiming to defer judgment until 2021, when every employer in Seattle will be required to pay $15 an hour. It’s a disingenuous ploy, in part because these same critics were eager to praise and spread a (debunked) story citing instantaneous closures.

If the question you’re asking is something along the lines of “has this minimum-wage increase helped a large number of low-wage workers make more money with a minimum impact on small business owners?,” then the answer is yes. It’s impossible to point to a rash of business closures because those closures don’t exist. New businesses are on the rise. Seattle’s unemployment is way down. It’s impossible to argue that the minimum wage increase has hurt Seattle’s economy, so critics are now trying to table the issue. Looks like a success story to me.

Daily Clips: June 29th, 2015

SCOTUS upholds the constitutionality of Arizona’s independent commission for redistricting: The 5-4 outcome will allow 13 states to continue to mitigate the amount of influence parties have in redistricting. This a huge win for American democracy. As the Associated Press reports,

Independent commissions such as Arizona’s “may be the only meaningful check” left to states that want to foster more competitive elections, the Obama administration said.

Scott Walker’s false freedom narrative: Whereas Democrats usually center their policy ideas around equality, freedom operates as the supreme organizing principle for the Republican party. In every speech, those on the right use freedom as their spring board for policy positions.

However, James Rowen takes issue with Scott Walker’s overuse of “freedom” and provides a list of his positions which have (in fact) severely undercut this principle. Here’s a little sneak preview:

* Marriage equality and all its inherent property rights, defined by the US Supreme Court.

* Access to health insurance without regard to income, defined by the US Supreme Court.

* Unfettered ballot access, including early voting and voting place hours.

* Access to medical services, including abortion rights defined by the US Supreme Court., at clinics serving women

Nate Silver says “change doesn’t usually come this fast”: Over at FiveThirtyEight, Silver wrote a brilliant article which illustrates the quick and unique shift in opinion relating to gay marriage. He argues that this shift has had many causes:

Some of it has taken place household by household and neighborhood by neighborhood; voters are considerably more likely to support same-sex marriage if they know a gay or lesbian person personally. Meanwhile, gay characters are now much more common, and are portrayed far more positively, on television and in the movies.

He then takes a “big picture” look at our era and reminds us that we still almost inevitably hold outdated ideas of what is right and wrong. He does this to remind readers that we have not yet reached the progressive “promised land”. Even now, we (most likely) harbor ideas that will, at some point, go by the wayside of history. Here, he quotes from Paul Graham who said in 2004:

It seems to be a constant throughout history: In every period, people believed things that were just ridiculous, and believed them so strongly that you would have gotten in terrible trouble for saying otherwise.

Is our time any different? To anyone who has read any amount of history, the answer is almost certainly no. It would be a remarkable coincidence if ours were the first era to get everything just right.

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Why Same-Sex Marriage Is Great for Business

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The Supreme Court made history today by legalizing gay marriage across America. This is a tremendous civil rights victory for the nation. It’s great news on a personal level for millions of Americans. And it’s positive economic news for Americans, too. I encourage you to go read Nick Hanauer and Zach Silk’s post about why diversity is good for the economy from earlier this year:

Here’s the 21st century reality: inclusion strengthens our country, our institutions, and our economy. And politicians in the twenty-one states fighting to keep their discriminatory marriage practices appear to be totally clueless about how modern technological economies work, and how extreme the competition for talented workers that drive innovation has become.

In the technological economy of the 21st century, growth and prosperity are created through a virtuous cycle between innovation and demand. Innovation is the process by which we solve all human problems, and thus raise living standards. Consumer demand is the mechanism through which markets distribute and incentivize innovation. And it is economic inclusion—the full, robust participation of as many people as possible—that drives both innovation and demand.

Innovation is an evolutionary process and, just like in the biological world, diversity is the key to evolution. The more cognitive diversity we have—the more people simultaneously approaching the same problem from as many different backgrounds and perspectives as possible—the greater the rate of innovation. It’s not how hard you try; it’s how many different ways you try to solve a problem that leads to success. Innovation is driven by differences, not sameness.

The evidence is clear: diversity does not hinder growth—it supercharges it. That has always been America’s competitive advantage: we have the most diverse workforce in the world, and for all our problems, we do a better job of integrating diversity than anyone else. Diversity is America’s most valuable resource; it is what makes us the most innovative nation on Earth.

Nobody needs another reason to celebrate today’s news, but it’s always heartening to learn that the right thing to do is also the most socially advantageous option. Go read the whole thing.

Against All Logic, Republican Presidential Candidates Vow to Keep Fighting Gay Marriage

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Here’s Jeb Bush’s statement on the Supreme Court’s decision to bring gay marriage to all 50 states:

Guided by my faith, I believe in traditional marriage. I believe the Supreme Court should have allowed the states to make this decision. I also believe that we should love our neighbor and respect others, including those making lifetime commitments. In a country as diverse as ours, good people who have opposing views should be able to live side by side. It is now crucial that as a country we protect religious freedom and the right of conscience and also not discriminate.

It’s not a great statement, but it’s about what I’d expect from Republican presidential candidates right now. Bush states his personal opposition to same-sex marriage and his affirmation of states’ rights. And he makes the same bullshit call for religious freedom that conservatives have been demanding for the past year or so. (This is just dog-whistle politics for bigots. Religion was used as a weapon against desegregation and interracial marriage, too.) But a good portion of the statement is made up of a call for tolerance, which is what we should expect out of our politicians. Both Lindsey Graham and Marco Rubio, who made his name as Jeb Bush’s mini-me, released similar statements.

But the rest of the Republican field seems to be forcefully protesting the decision. Of course Mike Huckabee, who I’ve recently decided is the worst man running for president this year, issued a predictably unhinged statement, basically threatening another civil war:

I will not acquiesce to an imperial court any more than our Founders acquiesced to an imperial British monarch. We must resist and reject judicial tyranny, not retreat.

Likewise, Rick Santorum unsurprisingly went full homophobe.

But I am surprised by Governor Scott Walker, who issued a scorched-earth statement that will haunt his presidential campaign forever. Walker chastises the court from the very beginning: “Five unelected judges have taken it upon themselves to redefine the institution of marriage, an institution that the author of this decision acknowledges ‘has been with us for millennia.” Walker continues:

As a result of this decision, the only alternative left for the American people is to support an amendment to the U.S. Constitution to reaffirm the ability of the states to continue to define marriage.

This push to rescind same-sex marriage might play well with the hardcore Republican base that shows up for the primaries, but it’s suicide in the general election. Roughly sixty percent of Americans currently favor gay marriage. Those numbers go even higher when you remove Republicans. A vast majority of Democrats and independents favor gay marriage, as do young voters. Walker’s aggressive push for exclusion throws a huge brick wall between himself and those voters. I loathe Walker’s politics, but I thought he was a smarter politician than this. The American people have decided that they want inclusiveness; Walker openly expressing disgust at that decision is reckless and stupid.