On Tuesday, Obama Labor Secretary Thomas Perez announced a change in the rules governing mandatory overtime. Hailing the new edict from on high as another big win for the American middle class, the White House explained that the threshold for automatic overtime pay for salaried employees working more than 40 hours a week would more than double, from $23,660 annually (or $455 a week) to $47,476 ($913 a week). The change is scheduled to go into effect on Dec. 1, 2016 and will apply to some 4.6 million workers.
The administration also took the unprecedented step of ensuring that the threshold would be updated automatically every three years by indexing it to salary growth in the lowest income region of the country.
As with the battle over the minimum wage, when it comes to forcing employers to pay their employees more, something has got to give. And — and as with increases in minimum wage — that something will be employees’ hours and/or jobs.
Randy Johnson, a senior vice president at the U.S. Chamber of Commerce, is quoted by the Wall Street Journal as saying the new rule “will not guarantee more income, but instead will negatively impact small businesses and drastically limit employment opportunities.”
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David French, a vice president of the National Retail Federation, glumly noted, “Just because there’s an overtime rule does not mean there’s going to be overtime pay,” adding:
The administration seems to be under the distorted impression that they can build the middle class by government mandate. Turning managers into rank-and-file hourly workers takes away … career opportunities.
The new rule is reminiscent of another Obama stroke of genius that has adversely impacted the workforce, and that’s the language in the Affordable Care Act that requires owners of business with 50 or more full-time employees to provide health insurance to employees. Some small businesses have circumvented this mandate by changing the status of full-time employees to part-time.
In response to the new overtime regulation, employers will cut workers’ hours, slow their hiring of full-time employees, and shift salaried workers to hourly employees who punch a time clock.
I am not suggesting that employees who work more than 40 hours a week in a salaried jobs are not deserving of some form of extra compensation. But if there’s one thing Americans should have learned after eight years of the Obama presidency, all stick and no carrot is a recipe for failure.