Editorial: New overtime rule will kill jobs
The Obama administration in its last few months is trying to push through some significant changes to eligibility for overtime pay. It’s been touted as a plan to boost wages, but in reality will kill jobs and derail career ambitions for many.
Changes to the Department of Labor overtime rule would dramatically — and immediately — expand eligibility for salaried employees.
Currently, salaried employees who earn $23,660 or less are eligible for overtime pay if they work more than 40 hours per week. The rule changes would more than double that salary threshold to $50,440.
This rule could have a chilling effect on employee job prospects because employers, particularly small-business owners, will be required to absorb the sizable new labor costs, or find other ways to reduce those costs.
Secretary of Labor Thomas Perez said about 5 million new workers will automatically become eligible, and that it would boost employee wages across the country by $1.3 billion. The Economic Policy Institute is even more generous, estimating some 13.5 million workers will have a new or stronger right to overtime pay.
But unless the Obama administration is planning to help employers pay for the rule with an infusion of cash into the economy via tax cuts or other measures to stimulate growth, it’s ridiculous to expect the higher pay demands will come without consequences.
The National Retail Federation estimates retailers would experience a $745 million impact and that 2 million employees would be affected.
Employers will be tempted to cut wages across the board to make up for the overtime costs, or cut the workforce and pay the remaining employees above the threshold.
Other alternatives will be to hire more part-time employees — similar to what happened when Obamacare took effect and full-time employees became a new costly burden.
And for anyone with career ambitions, the rule changes will be a hindrance. Those on track for management positions might see positions downgraded or removed altogether to cut costs.
The changes are also a blow to employers’ ability to provide more flexible schedules for employees. That will disproportionately affect women, who are more likely than men to use workplace flex time if it’s available, according to the Families and Work Institute.
It also flies directly in the face of Obama’s stated concern for helping women succeed in the modern workplace.
Congress has a few options. A bill has been introduced to nullify the DOL’s proposed rule, but such legislation would surely face a presidential veto. And a Congressional Review Act, which gives Congress 60 days to pass a resolution of disapproval to overrule the regulation, is also a possibility. It, too, would be vetoed.
Alternatively, Congress could rule to defund implementation of the rule changes.
The Obama administration’s sound bites on boosting wages are not grounded in reality and insult the people whose livelihoods this rule change will affect.