President Obama signed an executive order this week that’s aimed at broadening the expansion of overtime pay for millions of U.S. workers, who at the moment are not getting paid for their extra hours of work.
Most hourly workers today are expected to get paid time-and-a-half if they work beyond 40 hours a week. The same does not apply to salaried workers, however — with the exception of those who earn less than $455 a week.
This proposal in particular targets salaried workers who do in fact earn more than $455 a week but do not, under current rules, qualify for overtime pay because of their management status, even if their managerial duties are negligible.
“Unfortunately, today millions of Americans aren’t getting the extra pay they deserve,” President Obama said. Even Cecilia Muñoz, the director of the White House Domestic Policy Council, has said: “We need to fix the system so folks working hard are getting compensated fairly.”
The question is who will be most impacted by this proposal?
For starters, several million fast food managers, loan officers, computer technicians and their peers who are classified by employers as “executive or professional” so that employers can get away with not paying overtime.
Read our recent study about the decline of middle-wage jobs in the U.S., which lags far behind high- and low-wage jobs.
There are some naysayers to the proposal who argue that such a move may force employers — small business owners, in particular — to trim down their workforce. For instance, Daniel Mitchell, a senior fellow with the Cato Institute, voiced his reluctance suggesting that “there’s no such thing as a free lunch. If they push through something to make a certain class of workers more expensive, something will happen to adjust.”
On the other end of the spectrum are those who predict the move would actually boost the U.S. economy by expanding the circle of workers who’ll be able to put more money in their pockets at the end of the day. Some economists have also speculated that the move could push some employers to go ahead and hire more workers instead of paying time-and-a-half.
Jared Bernstein, former chief economic adviser to Joe Biden and former executive director of the White House Task Force on the Middle Class, said: “I think the intent of the rule change is to make sure that people working overtime are fairly treated. I think a potential side effect is that you may see more hiring in order to avoid overtime costs, which would be an awfully good thing right about now.”
This move comes on the heels of the president’s efforts to raise the federal minimum wage. You may remember that earlier this year, he signed an executive order that would require businesses with with new or renewed federal contracts to pay minimum-wage workers $10.10 starting next year, instead of $7.25.
Tell us in the comments below what you think of the proposal to overhaul overtime pay.