White House details sweeping measure to raise wages

By: Marianne Levine

Politico

The White House revealed details Tuesday of its most sweeping action to fight income inequality since President Barack Obama signed the Affordable Care Act into law. And unlike Obamacare, it will require no input from Congress.

The measure is a Labor Department regulation that will increase by more than four million the number of workers who qualify for overtime pay whenever they work more than 40 hours in any given week. At a time of stagnating wages — amid a tepid economic recovery that has yet to lift household income above where it stood 16 years ago — the rule will allow Obama to raise wages without increasing the minimum wage. That's an option the Republican Congress has blocked, prompting 29 states and the District of Columbia to set their hourly wage minimums above the federal $7.25.

The Obama administration estimates the rule will raise wages by $12 billion over the next decade, making it the federal government's most dramatic intervention in the wage economy since at least 2007, when George W. Bush signed into law the last minimum wage increase.

Even before it was released Tuesday in final form, the regulatory change had created an uproar in Congress and among business groups, with multiple congressional hearings on the damage it would purportedly wreak on the economy and the National Retail Federation calling it a "career killer."

But Ross Eisenbrey, vice president of the left-leaning Economic Policy Institute — which played a role in formulating the regulation — said it was “certainly the biggest thing" the Obama administration has done "in terms of improving wages and salaries."

On a conference call with reporters, Vice President Joe Biden said the final overtime rule was about "restoring and expanding access to the middle class," which he called "the defining issue of our time."

The rule, which will take effect Dec. 1, raises to $47,476 the salary threshold under which virtually all workers qualify for overtime pay. That's more than double the current salary threshold of $23,660 but below the Labor Department's proposed threshold of $50,440. Workers above the salary threshold may still be eligible for overtime provided their duties aren't executive, administrative or professional. The rule won't affect hourly workers, whom employers already must pay overtime.

For the first time, the Labor Department will tie the salary threshold automatically to inflation. Previously, lifting the salary threshold required the department to propose a new regulation — undertaking a politically and bureaucratically arduous process. Over the previous 40 years the threshold was updated only once before, also under Bush.

Under the new rule, the salary threshold will be revised upward every three years to match the 40th wage percentile of full-time salaried workers in the lowest-income region. Today, and for the foreseeable future, that region will be the Southeast.

Biden, Labor Secretary Tom Perez and Sen. Sherrod Brown (D-Ohio.) will appear Wednesday in Columbus, Ohio, to publicize the regulation. One measure of the rule's political significance is that Brown and Perez are both rumored to be under consideration as potential running mates by Hillary Clinton.

Tammy McCutchen, who was the Labor Department's wage and hour administrator under Bush, disputed the overtime rule would boost wages because, she said, employers would adjust hours worked to ensure they didn't have to pay overtime. “I think it’s very unlikely employees will see a larger paycheck,” she said. But she conceded that many employees would work fewer hours for the same pay.

The overtime rule comes as Congress thwarts the Obama administration's efforts to lift the federal hourly minimum wage, making Obama and Ronald Reagan the only presidents never to increase it since it was first enacted in 1938. Obama did, however, raise by executive order the hourly wage minimum for federal contractors to $10.10.

Legislation, sponsored by Sen. Patty Murray (D-Wash.) and Rep. Bobby Scott (D-Va.), that would raise the minimum to $12 has been endorsed by Obama and Clinton. Clinton's primary opponent, Bernie Sanders, introduced a separate bill that would raise the minimum to $15. Presumptive Republican nominee Donald Trump opposes raising the federal minimum wage.

Labor advocates said the update to the overtime threshold was long overdue. Forty years ago, the majority of salaried workers received overtime pay. Today, that number is fewer than 10 percent. Where overtime protection once extended to middle-class workers, today it is confined largely to lower-income workers; the current threshold set to be updated lies below the federal poverty line for a family of four.

Updates to the salary threshold (previously three and then, two separate thresholds) used to be routine. Between 1938 and 1975, the thresholds were updated six times. But Jimmy Carter hesitated to increase the thresholds at a time of double-digit inflation, and his successor, Reagan, resisted doing so out of a conviction that regulations in general were a burden to the economy. After Gerald Ford raised the thresholds in 1975, they remained unchanged until 2004, when Bush consolidated the thresholds into one. Bush effectively lifted the threshold from $13,000 for most employees to the current $23,660, an increase almost as great as the one undertaken by Obama. But he also tightened eligibility significantly for workers above the threshold, prompting loud protests from unions and his 2004 opponent John Kerry.

Clinton and Sanders praised the Labor Department publicly after it proposed doubling the overtime threshold. Republican presidential candidates haven't discussed it much during the primary season. The rule is a major priority for labor unions.

Republican lawmakers, not surprisingly, are far less enthusiastic about the Labor Department’s proposal. In March, lawmakers in the House and the Senate introduced legislation to block the rule sight unseen.

Business groups are also displeased. Randy Johnson, senior vice president for labor at the U.S. Chamber of Commerce, said that while the Labor Department made some changes to the final rule, it "still represents another regrettable burden being piled on employers as they attempt to grow in a tepid economy."

http://www.politico.com/story/2016/05/obama-administration-unveils-major-rule-to-raise-wages-223294