Millions of salaried workers are now in danger of losing their professional status and potential for upward mobility, with last week’s Department of Labor release of the final federal overtime rule. The Obama Administration has been no friend to the business community, advocating for a myriad of job-killing regulations and changing decades of defined labor policies, but this might be the most egregious overreach yet. The rule, which raises the salary threshold for workers who qualify for overtime pay from $23,660 to $47,476 – an increase of more than 100 percent – is yet another example of the administration’s out-of-touch view of the needs of America’s workforce.
Hurting the very people it is intended help – with entry-level professional employees and non-profit employees burdened the most – the new rule stunts workers’ professional growth, while also creating a massive regulatory burden on employers, who will be required to oversee careful timekeeping or open themselves up to lawsuits. A simple email response sent or phone call taken after normal business hours will now have to be tracked as time on the job.
The overtime rule sets an artificial ceiling on salaried workers, and will cause many small businesses to declassify their salaried employees and eliminate benefits with the loss of professional status. Expect to see a hollowing out of mid-level positions as employers transition roles to covered employees or part-time help.
Aspiring professionals will be disadvantaged by this rule the most. While current college graduates and other entry level employees are generally advised to prove their value by working hard to climb the professional ladder, this usually involves taking on extra projects and working longer hours to prove their worth. But this policy, by limiting the number of hours they can work weekly, interferes with an individual’s ability to determine their own career goals and choices. Entry- and mid-level salaried employees at issue were hired to fulfill a professionalized role, not an hourly job. You simply can’t view their role through the same lens as you would a factory worker or fast-food server who clocks in and out every day for an hourly wage – many professional jobs require more than the typical nine to five.
Expect flexibility in the workplace to acutely be impacted, as well. Salaried workers are often given more flexibility to complete their responsibilities, with specific hours mattering less, as long as the job gets done. But workers who have enjoyed flexibility in the past, like the 16 to 25 million Americans who telecommute at least once a month, will likely see those options eliminated thanks to the new rule. And the Department of Labor’s failure to take into account regional differences, even though a $47,000 salary has a much greater spending power in Pierre, South Dakota than it does in Washington, D.C., could deal a crippling blow to professionals in rural areas.
Economists and labor policy experts have studied the impacts of overtime requirements on businesses, and have found time and again that companies offset new overtime costs with the lowering of base wages. In fact, a recent report by Anthony Barkume, Senior Research Economist with the U.S. Bureau of Labor Statistics’ Office of Compensation and Working Conditions, calculated that workers pay for 80 percent of overtime costs through cuts in their base wages.
So if increasing wages wasn’t the Obama Administration’s goal, what was?
According to the text of the rule, the two policy objectives outlined are to “spread employment … by incentivizing employers to hire more employees rather than require existing employees to work longer hours,” and to “reduce overwork and its detrimental effect on the health and well-being of workers.” Workers want to work more, not less. They want to rise through the ranks in search of the American Dream, not have their potential hindered by big government controlling the lives of individuals.
A one size fits all approach to labor policies is incredibly misguided and will have ramifications across our entire economy. Republican leaders in Congress are already working to pass legislation nullifying the overtime rule, the Protecting Workplace Advancement and Opportunity Act. Let’s hope they succeed, and soon, before the American workplace is permanently changed for the worse.