Not satisfied with economic distortions resulting from the redefinition of full-time employment to 30 hours for Obamacare purposes but 32 hours for every other purpose, President Obama is back at it.
Today, by executive order, Obama doubled the threshold for overtime pay to $47,476 a year.
The Labor Department estimates the ruling will affect 4.2 million workers.
Please consider Obama Administration Extends Overtime Pay to Millions.
Millions more Americans are set to qualify for overtime pay under a final Labor Department regulation, in what could be President Barack Obama’s last big push to shore up workers’ wages.
The threshold will be doubled to $47,476 a year from $23,660, a level last updated in 2004, administration officials said Tuesday. That means workers who earn annual salaries of less than $47,476 will be eligible for overtime pay, while eligibility for those with salaries of that much or more will depend on their job duties.
The new level is a few thousand dollars less than the $50,440 regulators proposed last year. At that level, the Labor Department estimated 4.6 million workers would be newly eligible. On Tuesday, they said 4.2 million workers would newly qualify for the added pay, with 35% of full-time salaried workers expected to fall below the threshold under the new rule. They also said the rule is expected to boost wages for workers by $12 billion over the next 10 years.
Companies will face a choice about how they implement the regulation, including paying their workers overtime or possibly capping their hours, Mr. Biden said. “Either way, the workers win” by either getting paid more or getting their time back to help raise their families or go to school, he said.
The administration also took the unprecedented step of ensuring the threshold will be updated automatically, every three years, by indexing it to salary growth in the lowest income region of the country. Also for the first time, the rule will allow bonuses and incentive payments to count toward up to 10% of the new salary level. The rule takes effect on Dec. 1.
Even the scaled-back threshold likely won’t satisfy employers who flooded the Labor Department with pleas to lower the amount more sharply. The agency received 270,000 public comments on its proposal, many from employers and industry groups who said the rule would force employers to cut workers’ hours, slow hiring of full-time employees and shift salaried workers to hourly employees who have to punch a clock.
The overtime rule is likely to change how businesses compensate employees. The Texas Roadhouse Inc. steak house chain tends to offer lower base salaries, but “a lot of incentive compensation,” President Scott Colosi told investors earlier this month. “It doesn’t sound like the Department of Labor is going to give us much credit for the incentive compensation that we pay.”
Before knowing the specifics of the rule, he said bonuses could be reduced by 25% to 50%, so that base salaries for managers could be increased above the threshold.
Jeff Lawrence, Domino’s Pizza Inc.’s chief financial officer, said during a recent investor conference call that the company is going to have to see how the rule shakes out. The rule change is primarily “going to cause you to be far more efficient about not having overtime in your stores.”
Of the 2.2 million retail and restaurant workers the retail federation expects to be affected, it estimates about 104,000 whose pay is closest to the new likely threshold would see an increase in their base salaries by a total of nearly $159 million, or more than $1,500 for each worker. However, it expects those workers would also see an equivalent decrease in their benefits and bonuses.
Likewise, the group estimates hundreds of thousands of workers would be reclassified as hourly employees instead of salaried workers. Many could then have their hours cut to 38 hours a week in order for their employers to avoid paying them any overtime.
Four Likely Consequences
- Less Overtime
- Reduced benefits
- More incentives to dump employees
- Reduced bonuses to those most deserving of them
Defining Issue of Our Time
Vice President Biden: The rule “goes to the heart of the defining issue of our time, that is restoring and expanding access to the middle class”.
Obama Administration: A sizable jump is needed because inflation has eroded the value of the current threshold, leaving too few eligible for added pay in an economy where wages have stagnated.
Mish: Are wages the problem or is inflation the problem?
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Bernanke, Yellen, Larry Summers, and most of mainstream media has everyone convinced that lack of inflation is a problem.
Real-life results suggest otherwise.
Mike “Mish” Shedlock
Why do we even bother to vote for members of Congress or the Senate?
All obama needs to do to rule over us is to use executive orders.
Please! Obama is not “ruling over us”.
Valerie Jarrett is.
Congress creates laws that it purposely knows will allow executive agencies wide latitude in how they are enforced.
Hope and Change. Well, we got Change but the Hope part? Hope is just an emotional state in the absence of information…
It was hopeless in chains, you gotta listen
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. “Either way, the workers win” by either getting paid more or getting their time back to help raise their families or go to school, he [Biden] said.
What a jerk; typical liberal justification.
People are desperate for a job, and he tells us unemployment is getting their time back.
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As conservative as I am, I am on the side that says this is basic fairness. Employers have used “salaried” status as an excuse to work low level employees 50+ hours a week with no overtime (actually no pay for the excess over 40 much less overtime). This has been abused for a long time and needed to be fixed. Was this the right way….. probably not, but it was needed.
The problem isn’t inflation, it’s a completely lawless White House and a Congress that refuses to do anything about it.
“CEO pay more than 300 times average workers in 2014” I think most companies can afford to pay the overtime. Or they will let workers leave on time and they can use that time to work a second part time job. Time is money
Why do people think that they can wave a magic wand and more money will magically appear? If a company is paying $40,000 for a job, and they expect the employee to work 50 hours a week, they can change that employee to $14/hour, and lo and behold, the employee will get paid about the same thing at the end of the year, and work about the same number of hours. Oh, but if you figure that $40,000 for 52 forty hour weeks is $19.23? What does that have to do with anything? If the job is worth $40,000, it’s worth $40,000, not $55,000. Where is the company supposed to magically come up with the extra $15,000?
Another possible solution that the company might take would be to pay $15,28/hour, and cut the employee to 40 hours, and give the other ten hours to another employee. Again, the net cost to the employer remains at $40,000 a year for the job, but the employee gets a cut from 50 hours to 40, and from $40,000 to $32,000, while the other employee gets the other $8,000.
“Why do people think that they can wave a magic wand and more money will magically appear? ” No kidding, you have to be the Chairman of the Fed if you want to do that.
You obviously fail to understand the relationship between supply and demand…but of course you don’t, as you believe that a government should amend that laws of nature and simply impose a NEW reality on the world. The more these corrupt manipulations distort and destroy our economy, more and more we DEMAND they do more and more to distort our economy to fix all of the unintended and unattributed negative effects.
As we substitute saw dust for feed for our livestock, their health deteriorates demanding even more saw dust be substituted….until the day they all mysteriously die. Expensive in-depth studies will be done to determine the cause of their untimely death which will end with mixed results, none of which point to the nutritional value of saw dust, but give cause for them to do even wider studies with saw dust mandated as a feed substitute nation-wide in hopes of a breakthrough as to what could possibly be the problem. It is a technical issue well beyond the understanding of simple lay people and they will be prevented by force of law to intervene.
Anyone can look at our circumstances, no economist degree required, to see the disaster these interventions have created. Massive distortions that seem to demand massive manipulations to cover up.
I have one employee who will be affected by this, since she makes about $45,000 a year. I doubt the result will make her happy. She will have to start clocking in and out, and her wages will now vary from payroll to payroll, making it harder to pay pay bills during the slow times. Her pay for the year will not go up, nor will she work less hours. It is what it is, though.
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.Or most will be watching work hours like a hawk.
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.Make sure there are no breaks, internet surfing, personal calls, facebook.
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They just made a lot of peoples jobs less enjoyable.
Well, of course. That goes without saying. When she’s on salary, all i care about is that the job gets done. If she needs to take personal time off to run errands, or take care of family issues, why do I care? I don’t. If she takes 50 hours to do 45 hours work, that’s up to her. For that matter, if she does her job in 35 hours, and ducks out early, I don’t care, either. It’s a relationship that works for both of us. But, if the government says she needs to be pair hourly, I’ll comply, but everything will be a lot less low-key.
Yes, inflation is the problem. Without inflation, wages would buy additional goods over time. Workers would benefit from productivity improvements, instead of just bankers. Inflation is bankers confiscating goods from Joe average, and putting those goods in banker pockets.
I’m hoping President Donald’s first executive order will be: All executive orders issued by Obama are hereby cancelled.
Based on his comments during the debate “I will do this” or “I will do that”, as opposed to “I will work with Congress to do this”, I expect that Trump, if elected, will be a very imperial President.
At least a capitalist imperial president will be better than the previous socialist imperial president, or the other choice, the ultimately corrupt warmonger bankster’s candidate. No need to say her name.
Every politician SAYS they will do this and that but we understand the powers of office. He is stating his AGENDA and trying to demonstrate his commitment to it, but to pretend that Trump is any more dictatorial than another is simple crap. We KNOW what Obama is doing and we PRAY that our next president will RESPECT the enumerated powers as defined in our laws and constitution to a much higher level.
I can only imagine a politician running for office telling of what he will TRY to do with his LIMITED powers. People are demanding ACTION. Unfortunately people will embrace tyranny as long as it feathers their bed.
Here’s the perfect setting:
Trump is sworn in, and they move the Inaugural Ball to the Oval Office where Trump takes the executive orders and shreads them individually while a choir sings the National Anthem.
and all federal regulations issued after January 20, 2009 are rescinded.
That would go a long way toward Making America Great Again!
he essentially said that months ago – check out the short video ‘first day in office’
regarding this Obama rule on O/T – only someone whose never had a productuve job nor ever made a payroll would think such middle headed foolishness is sensible.
it’s cargo cult economics
Proof that your President loves you – if you are not American.
Obama spending millions to find summer jobs — for refugees
http://www.theamericanmirror.com/obama-summer-jobs-program-devotes-least-2-million-refugee-youth/
“…I think most companies can afford to pay the overtime.” Why do so many people think that wages are not a zero sum game? The company can neither “afford” or “not afford” higher wages. If wages are increased then the selling price of the product is increased. If wages are decreased then the selling price of the product is decreased. The company does not care one way or the other, except that it does not want to raise the price of its product.
Must be fun to live in your simple math theoretical world where a business can arbitrarily raise prices and the market will bend over and happily oblige. As a small business I can confidently say that markets are not all that elastic and customers will defer or seek alternatives to higher prices. Evidently you have not been following the numerous earlier post explaining the expansion of automation as a response to higher wages and diminishing markets.
Bill,
You need to take an ECON 101 class. They should cover a basic price/demand curve in the first week. That should clear it up for you. (Hint: often when prices go up, demand will go down due to alternatives or limited discretionary income. So when businesses raise prices, sometimes they actually lose money.)
Or, you go go to a Khan Academy video and get the same information for almost free. It would be well worth your time to grasp some basic economic fundamentals.
Usually I try to Mean Revert to Hanlon’s Razor. However at this point in Obummer’s presidency i do not think stupidity is adequate to explain what he is doing. There is a continuous pattern which can only be explained by bad intent.
When I hear the word “contempt”, the picture of Obama immediately pops into my head. He’s the poster boy for comtempt of Americans.
The all-knowing smug “smirk”.
“Obama Administration: A sizable jump is needed because inflation has eroded the value of the current threshold”
Memo to FED: POTUS says “We have too much inflation, and it is damaging workers.” Time to stop the printing presses. Mission Accomplished.
Orwellian doublethink is alive and well. Dysfunctional government is the new normal. 1984 and Catch 22 have merged and been rebranded as the Obama Administration.
Actually, I think the whole idea of promoting wage inflation is to increase government tax revenues per employee. Inflate everyone into higher tax brackets under the guise of compassion and caring for the workers ala Marx (Karl, not Groucho). Of course, the political dimwits did not study the Herbert Hoover & FDR wage inflation policies of the 1930s and the unintended consequences of hare-brained compassion for the worker. On the other hand, these could be geniuses collapsing the economy to increase the demand for more government power to intervene and correct the problems arising from previous government interventions. Kind of like a perpetual motion machine for endless expansion of government power.
Increased wage burdens will eliminate jobs AND businesses. Fewer competitors will result in higher prices above and beyond and increased wage benefits to employees. In order to see real wage increases we need real wage pressure created by DEMAND for labor. We know this is not currently happening as we see massive numbers pushed out of the employed group while automation is on the rise. Everything our government has done has INCREASED the cost of employment and this is what is driving jobs OUT of the market. We cannot continue to put more and more pressure on employers and not expect this result. At what point will our government go Venezuela and start forcing employment and prices of everything in an attempt to PROVE their dominance of true markets?
It is massively frustrating for me to see such absolute rejection of free markets that REAL freedom creates. Yes, there IS creative destruction. People lose jobs. Some people get filthy rich. But it is CREATIVE destruction as compared to the simple deliberate DESTRUCTION in the pursuit of “financial justice”, that is completely in the eyes of its beholder…typically a government empowered hack “economist”.
“Increased wage burdens will eliminate jobs AND businesses…”
Good observations. The “unseen effect” will be that people will reason that the USA is not the best place to start new businesses. Good for other countries that will get the investments and new jobs instead of the USA. With compassionate people looking out for the workers (a paternalistic approach, like European colonialism), so-called trade treaties are no longer the cause of the big sucking sound. Self-inflicted job loss and perhaps more importantly self-inflicted lessening of new job creation.
A random isolated action, or part of a larger plan? Could it be possible that those in government are “progressively” directing this rule-making in order to make the populace progressively more subservient to the government teat for survival? Marxism 101, a pure power play to get total (as in totalitarian) control of the populace. What else would you expect from a Marxist president, socialism lite? No wonder the Castro brothers welcomed him.
Connect the pieces and you get Bismarck’s grand plan that worked fabulously well for Germany, preparing them for Empire, two world wars, and domination of the EU (empire again). Bismarck thought that cradle to grave state welfare (jobs + health care) plus public schooling (socialization) to instill obedience was the best way to produce fighting men for the German army. Might have antecedents in the ancient Greek world. In any case, put it all together: 1) control of bodies/health via Obamacare, 2) control of minds via public schooling and media propaganda, and 3) reduced private jobs to foster dependence on government largess and we get a “transformed” USA modeled on Bismarck’s plan for Germany. All ready and waiting for Hilary to create more Libya success stories around the world for the empire. Hilary & Merkel will rule the world to together, if we enable them. Feminist War Mongers must be licking their chops.
It’s a good law. It stops the abuse of lower level salaried workers having to put in 60+ hours a week. They should hire more people instead.
It is not a LAW as LAWS are created in a legislative process. This is a DECREE by the O’Lord to enrich the rabble who adore him. As an employer I can GUARANTEE you that it will have the opposite desired effect, just as EVERY OTHER brilliant scheme they have come up with has done. I have been in business for thirty years and have five employees. IF (and that is a big IF) I experience the need for more productive capacity, I can promise you I will look for a tech solution before I consider taking on another liability/employee. It is sad it has come to this.
THIS is what hope and change and a fundamental transformation of America LOOKS LIKE.
If labor is considered a “resource” or “input” like oil or electricity, then would not making it more costly lead to conservation of the resource? Higher oil prices, and people have to cut back and look for alternatives. Why should not higher labor input costs be any different for businesses? Less labor use is inevitable. In other words, fewer jobs for humans in the USA.
I guess if you are socialist/Marxist, you would argue for the abolition of capitalism and have worker-owned/state enterprises creating jobs and incomes based on some formula of equitable compensation not subject to free market forces. George Orwell’s Animal Farm was modeled after socialism. These hybrid models forced down the throats of business by government have predictable results, as the business owners make clear in the comments and real world examples such as Venezuela demonstrate. Compassionate intent is no guarantee of the desired results.
IF the reason for raising the number is inflation, it should have gone up by 1.27 – so, the number should be $30’048.20.
I am mostly amazed they didn’t rule anything over 35 hours was “overtime”.
I am amazed that we have not been mandated to pay ALL employees overtime for ALL hours. After all, they are being very generous to even show up for work.
FDR is still alive, but then again, so is Marx and Mao.
Governments only power is to TAKE from some to GIVE to others (after taking their cut of course)
Yet another assault on small business. November can’t come soon enough.
I see another likely consequence: Salaried positions becoming contract positions. The “employee” still works 60 hours a week in order to fulfill job requirements. Might not even have to pay them much more if they didn’t have insurance anyway, only a bit more for them to pay their own taxes.
Thanks, hadn’t thought of that one! Gets rid of all the benefits too!
Doesn’t actually work that way. If you treat a contractor like an employee, federal regulations say you have to pay them as an employee. Been burned on that one before.
Companies will face a choice about how they implement the regulation, including paying their workers overtime or possibly capping their hours, Mr. Biden said. “Either way, the workers win” by either getting paid more or getting their time back to help raise their families or go to school, he said.”
Or they lose their job. That is another option for companies to implement the regulation. Cut staff in order to afford overtime for others.
I’d find that unlikely. If you didn’t need them that much you normally wouldn’t hire them in the first place.
This is a problem for a pizza franchisee. You have a sharp guy who runs the place 8 hours a day, 5 days a week. But you are open 11 hours, 7 days a week. And you have a part-time manager who runs it the rest of the week.
But your part-timer gets sick and is out a couple of days, so your regular guy works the overtime. Now you’re paying the overtime rate for the extra hours and the person on sick leave.
This is just going to come out of your bottom line net income.
The War On Middle Class Shrinkage!
God help us.
“The overtime rule is likely to change how businesses compensate employees.”
For each action, there is an equal and opposite reaction.