In a bid to address income inequality nationwide, President Barack Obama announced his proposal to extend overtime pay Tuesday, a ruling that updates a significant labor regulation and would result in larger paychecks for nearly 5 million workers.
The proposal would guarantee overtime pay to most salaried workers earning less than an estimated $50,440 next year, more than double of the original threshold.
Under current law, any salaried worker who earns below a threshold set by the Labor Department can receive overtime pay, or a rate of one and one-half of their regular pay for every hour worked over 40 in a workweek. The present ruling, first instituted under the Fair Labor Standards Act, sets the threshold at a low $23,660, an amount lower than the country’s poverty line for a family of four.
The proposed threshold would cover 40 percent of salaried workers — 56 percent of whom are women and 53 percent of whom have a college degree, according to the White House.
“[This] goes to the heart of what it means to be middle class in America,” Labor Secretary Thomas Perez said.
In Connecticut, over 20,000 people could see raises if his plan succeeds. The ruling would likely see the biggest effect in Ansonia, Bridgeport, East Hartford, Hartford, New Britain, New Haven, New London, North Canaan, Putnam, Torrington, and Windham — towns whose median household incomes all currently exceed $23,660, but fall below $52,000.
Gov. Dannel P. Malloy said the federal government’s focus on income inequality is a “reasonable thing” in a society “where the middle class and poor people have not done nearly as well” as others.
Obama has been consulting on the contents of the proposal for the past several months, and has continuously alluded to the ways in which he believes the past proposal to be antiquated.
“If your salary is even a dollar above the current threshold, you may not be guaranteed overtime,” the President said in March. “It doesn’t matter if what you do is mostly physical work like stocking shelves; it doesn’t matter if you’re working 50 or 60 or 70 hours a week — your employer doesn’t have to pay you a single extra dime.”
The current ruling, which once covered 62 percent of full-time salaried workers but has largely eroded due to inflation, has only been updated twice in the past 40 years.
Obama’s proposal aims to rectify this, as well as tighten the language of the current exemption rule that excludes “executive, administration, and professional employees” from overtime benefits.
Employers routinely use this loophole to avoid paying overtime to lower-wage workers such as store managers or shift supervisors by allotting them menial responsibilities and qualifying them as managerial staff.
“It’s good for workers who want fair pay, and it’s good for business owners who are already paying their employees what they deserve — since those who are doing right by their employees are undercut by competitors who aren’t,” Obama said in his op-ed.
However, the business and industry lobbies have vehemently disagreed.
“The Administration seems to be under the distorted impression that they can build the middle class by government mandate,” the National Retail Federation said in a statement. “Turning managers into rank-and-file hourly workers takes away the career opportunities offered by private sector entrepreneurs and job creators that are the true path to middle-class success.”
The NRF predicted that, should the proposal be implemented as is, there will be a significant decrease in employee training, which would hinder mangers’ ability to lead by example.
Another study by the organization suggests that businesses will do whatever it takes to offset the billions of dollars lost, including cutting bonuses and benefits in order to increase base salaries above the new threshold, reducing some hours to fewer than 40 per week in order to avoid paying overtime, and lowering hourly rate of pay overall.
“There simply isn’t any magic pot of money that lets employers pay more just because the government says so,” the NRF said.
The organization, along with other members of the business industry, has vowed to fight against the proposal during the Labor Department’s 60-day comment period on the plan. Because the proposal is a “rule change,” it’s more like an executive order, and does not have to go through Congress. However, during the comment period, the proposal is subject to change.
Obama is heading to Wisconsin on Thursday where he will further discuss the details of his proposal.