One proven way to boost middle-class wages
Senior Fellow Chris Lu writes on CNBC that overtime pay is a winning strategy
In positive labor news, U.S. employers added a robust 250,000 jobs in October, and as importantly, wages grew at the fastest pace since 2009. This is encouraging, and perhaps a sign that American workers will finally enjoy a long overdue bump in their paychecks.
However, more proactive steps are needed if we want to make up for decades of wage stagnation.
One proven approach is raising overtime pay.
Despite the nation reaching an unemployment rate not seen in almost five decades and employees being more productive than at any point in our nation's history, the typical worker takes home less money now than before Donald Trump took office. Corporate profits are soaring because of tax cuts, yet an astonishing 40 percent of Americans can't afford an unexpected $400 expense.
The cause of America's wage stagnation problem is clear: policymakers have failed to adopt proven measures to raise pay. That's why it was so significant that Amazon coupled its recent decision to raise its employees' wages with a commitment to support an increase in the federal minimum wage, which hasn't gone up in over nine years.
At the state and local level, there's reason to be optimistic about worker pay. On November 6, voters in states like Arkansas and Missouri and cities like Anaheim will consider ballot initiatives to raise local minimum wages. This is a vital course correction away from the trickle-down policies that have failed to spread corporate profits to average Americans.
However, raising the minimum wage on its own isn't enough. If we want to restore an economy that works for everyone, not just the wealthiest few, more needs to be done. One way to put the middle class back at the center of the economy is through overtime pay.
Raising the minimum wage isn't enough. If we want to restore an economy that works for everyone, not just the wealthiest few, more needs to be done. One way to put the middle class back at the center of the economy is through overtime pay.
Typically, an employee who works more than 40 hours a week is entitled to time-and-a-half pay for any extra hours. The problem is that most managers aren't eligible for overtime pay. So, a lower-wage employee could be given some managerial responsibilities – for instance, opening the store in the morning – and be forced to work 60 or 70 hours a week without overtime pay. Even if she spent the rest of her day performing physical duties like stocking shelves or working a cash register, her quasi-managerial status would render her ineligible for overtime pay.
Right now, workers who earn over $23,660 a year could find themselves laboring more than 40 hours a week without earning overtime compensation. That's why the Obama Administration moved in 2016 to double the salary threshold from $23,660 to $47,476 under which all employees must receive overtime pay. Raising this threshold made 4 million more workers eligible for overtime pay. It's no wonder this policy been called "a minimum wage hike for the middle class."
With the typical salaried employee working 49 hours a week, this policy change would've provided a substantial uptick in paychecks. To be sure, some employers might've chosen to hire additional workers instead of paying overtime to existing staff. That's a good thing, because it creates job opportunities for more people. And for the employee who goes from working 60 hours a week to only 40 hours, she now has more time to attend her child's soccer game, pursue a favorite hobby, or give back to the community.