- Democrats trying to demonstrate progress on wage issues
- House Speaker Paul Ryan says rule would hurt workers
Vice President Joe Biden said a new rule requiring overtime pay for about 4.2 million more Americans will create a “virtuous cycle,” injecting more than a billion dollars a year into the economy, in a move Democrats hope will give workers a reason to vote for them in November.
The new rule, first proposed last summer but not finalized until deep into the presidential primary campaign, addresses a pivotal issue in the election: anxiety over the slow recovery in middle-income wages since the 2008 financial crash. For Democrats, the overtime requirement may demonstrate a concrete accomplishment to Rust Belt voters concerned that the economic recovery has left them behind.
Biden announced the rule in Ohio, a state that’s key both to Democrats’ chances of holding the White House and retaking the Senate in elections this year.
“All of this goes back into the economy and grows the economy overall,” Biden said at Jeni’s Splendid Ice Creams in Columbus. “It has a rippling effect.”
Under the rule, to be issued by the Labor Department, employers will have to pay workers at least $47,476 before they can be classified as managers ineligible for time-and-a-half overtime pay after 40 hours of work a week. The current threshold is $23,660. The rule takes effect Dec. 1, just before Christmas.
“It’s an open question whether Democrats and the Democratic Party can convince voters they have plausible solutions for those who are making above the minimum wage,” said Guy Molyneux, a partner at Hart Research Associates who has done polling on the issue for labor unions. The overtime rule “is an important step,” he added.
President Barack Obama, writing in a White House blog post, said the move would “strengthen and secure the middle class by raising Americans’ wages.”
The administration last year had proposed a higher threshold, $50,440, but reduced it in response to arguments from some businesses that the requirement would be burdensome in regions with low cost of living.
“The salary threshold is woefully out of date,” Tom Perez, the U.S. labor secretary, said at the event with Biden. Had it been indexed in 1975, he said, “the threshold would be over $57,000 a year.”
Labor unions key to Democrats’ chances in November said they were pleased.
“It will be the single biggest policy change in terms of impact on working peoples’ wages that we have seen in decades,” Damon Silvers, policy director for the AFL-CIO, said in an e-mail.
The move, the White House says, will raise Americans’ wages by an estimated $12 billion over the next 10 years. According to administration projections, more than half of beneficiaries will be women -- a key target for Democrats in November -- while 80 percent have some college education.
Business groups that customarily support Republicans were critical, and congressional Republicans said they would fight the rule.
“This regulation hurts the very people it alleges to help,” House Speaker Paul Ryan, a Wisconsin Republican, said in a statement. “By mandating overtime pay at a much higher salary threshold, many small businesses and non-profits will be unable to afford skilled workers and be forced to eliminate salaried positions, complete with benefits, altogether.”
Senate Majority Leader Mitch McConnell, a Kentucky Republican, blasted the rule as “more red tape” for businesses.
The White House said it had considered the perspective of business while drafting the regulation. In a concession to employers, the administration said companies will be able to count bonuses and commissions toward as much as 10 percent of the salary threshold. And officials said they did not implement changes to the so-called duties test that would have further expanded overtime because businesses said it would be too burdensome.
“There’s an awful lot of free hours companies pick up instead of workers earning extra pay or spending time with their families or going back to school,” Biden said, describing the rule as part of an effort to restore and expand the middle class.
“It’s not just about fairness,” he said. “It’s about stability, social and political stability.”
The setting for the vice president’s announcement has clear political implications. No Republican has won the White House without winning Ohio, and the last Democrat to do so was John Kennedy in 1960.
Democratic presidential candidate Hillary Clinton praised the move in a statement on Wednesday, saying it would “lift up workers nationwide and help get incomes rising again for working families.”
Her opponent, Bernie Sanders, applauded the move on Twitter. “It’s time hard-working Americans got the pay they deserve,” he said.
Overtime rules have long been a priority for the Vermont senator, who last year asked the administration to set the salary threshold at $57,000.
Donald Trump, the presumptive Republican nominee, has not weighed in directly on the rule, although many Republicans have argued the change will slow hiring. Still, Trump has frequently bucked Republican economic orthodoxy, indicating some willingness to increase taxes on the wealthy, roll back free-trade agreements, and boost the minimum wage as he builds a populist following. Winning Rust Belt states like Ohio and Pennsylvania is crucial for Trump’s campaign, and the real-estate developer has emphatically courted working-class voters.
Median household income in Ohio has slipped further behind the rest of the country since the start of the recession in 2007. The state fell from 23rd in the country in 2007 to 35th in 2014 -- $4,013 behind the national median.
The 1938 New Deal-era law establishing the federal 40-hour workweek and requiring overtime pay for additional hours exempts professional, administrative and executive employees.
Labor Department regulations define those categories, in part, by a minimum salary. The overtime threshold, eroded by inflation, has only been raised once since 1975 -- a readjustment in 2004 under President George W. Bush that was criticized as too modest by labor unions and some Democrats.
Seven percent of salaried workers currently fall under the overtime threshold compared with 62 percent in 1975, according to a fact sheet provided by the White House. The new threshold will cover 35 percent of salaried workers, Perez said.
The threshold will be indexed to prevent further erosion, with the level set at the 40th percentile of earnings for full-time, salaried workers in the lowest-paid region of the country, currently the South. The proposed rule released last year had set it at the 40th percentile nationally.