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Overtime Rules Seen Boosting Low-Wage Hiring

Wall Street Journal (07/20/15) Eric Morath

Some economists and businesses say the Obama administration’s proposal to expand eligibility for overtime pay will more likely add to the number of low-paid workers. The revamped regulation would make about 4.6 million more workers eligible for overtime pay. Salaried employees earning less than $50,400 annually, or about $970 a week—more than double the current salary cap—would be eligible for time-and-a-half pay when they work more than 40 hours a week. The average annual wage for all U.S. workers last year was $47,230.

Some businesses are contemplating strategies that would run counter to the government’s effort to boost the wages of working-class Americans. Rather than increase the total compensation of salaried managers, companies could limit the hours of higher-paid employees by using more part-time workers. Goldman Sachs economists estimate the proposed rule will create about 120,000 new jobs in the year after it goes into effect. But the changes will not exert any meaningful upward pressure on wages, they conclude. The National Retail Federation says the proposal will not achieve the administration’s goal of increasing wages and will instead limit employees’ hours and block promotions.