The real economy continues to muddle along in year six of the Obama presidency, so the emerging White House strategy is to describe for voters a fantasy economy of surging incomes and prosperity. On Thursday Mr. Obama is expected to order the Department of Labor to make millions of salaried workers eligible for overtime pay. New categories of white-collar employees will likely become eligible for time-and-a-half pay once they exceed 40 hours of work per week.
Specifically, Mr. Obama intends to raise the salary level above which most workers are exempt from overtime rules from its current $455 per week. He also intends to limit exemptions for managers and those who provide specific expertise. Labor lawyers at Fortney & Scott predict that the new minimum salary level for exemption will be $970 per week, $50,440 per year.
Assistant editorial page editor James Freeman on why the Obama administration plans to expand overtime wage eligibility. Photo credit: Getty Images.
Unlike the President's stalled legislative proposal to raise the federal minimum wage to $10.10 per hour from $7.25, new overtime rules can be enacted administratively. Once the bureaucrats have completed a draft and the public has had a chance to comment, it will become more expensive to employ people in retailing, restaurants, finance, technology and other fields, including government and nonprofits.
And like the Obama plan to lift the minimum wage, the looming overtime rules will operate on the premise that Washington can conjure middle-class wealth simply by ordering higher compensation for workers in the private economy. Liberal activists are angry that businesses have increased profits while wages and job growth have stagnated during the Obama recovery. So the idea is to redistribute money from owners to workers.
Economists may laugh at the notion that the feds can adjust the price of labor without consequence. The plan doesn't appear to include a mechanism to force business owners or customers to eat the entire cost of ObamaRaises. It's likely that some firms will accommodate higher costs per worker by employing fewer workers. The rules will particularly harm workers who want to climb the economic ladder by going the extra mile for their employers and demonstrating why they deserve promotion. Now many businesses will tell employees with ambition they can't work long hours.
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