On Monday evening, via an op-ed in the Huffington Post, President Obama announced a new rule that would increase the Americans eligible for overtime by an estimated five million. The rule, which does not need congressional approval but faces legal challenges, would require employers to pay time-and-a-half overtime for employees who work more than 40 hours a week if they earn $50,440 per year or less. The current threshold is only $23,660.
Predictably, Republicans, along with the politically conservative U.S. Chamber of Commerce, oppose the change, which they claim will threaten the recovery and put the brakes on job creation. They're wrong. Even if you're a small business owner, there are plenty of reasons to like the new rule. Here are a few to consider.
1. It's a lot fairer.
The existing threshold makes it legal to withhold overtime from people who are working full time, yet living below the poverty level for a family of four. About two years ago, McDonald's got a major black eye when activists got their hands on a recording of a McDonald's representative telling a low-paid employee how to sign up for food stamps. McDonald's responded by saying it would raise its salary for its lowest-paid employees to $1 above the local minimum wage, but its brand reputation as an abusively low-paying employer remains unchanged.
Someone with a full-time job should not fall below the poverty level in a just society. And most small businesses don't need a new labor law to pay their employees a living wage. But some small employers are struggling to compete against companies with the low prices abusively low salaries make possible. This rule, if enacted, will level that playing field.
2. It's a simple adjustment for inflation.
The previous threshold of $23,660 has been in place since 1975. Do you know of anything whose price hasn't gone up since then? I don't. In fact, according to The New York Times, a 2015 salary of $50,440 has approximately the same buying power as $23,660 had in 1975.
3. It should lessen income inequality.
Income inequality in this nation is at an unprecedented level this decade, with the highest-earning 0.1 percent of households earning a whopping 10 percent of the income in 2013, while 50 percent of earners are poor or low income. That's a problem for everyone because (as we've seen with riots nationwide becoming more and more commonplace) an increasingly unequal society is also an increasingly unstable one. Growing income inequality tends to precede big economic upheaval--the last time it peaked was in the 1920s.
4. It should improve the economy.
In fact, that's one big reason Obama is taking this step now. Time.com reports that changing the overtime rule became a higher priority for Obama in the wake of an Economic Policy Institute report arguing that bringing the rule into the 21st century would strengthen the economy.
That makes sense to me because (despite claims that it would hurt job creation) the new rule would encourage employers to add more employees to get all the needed work done without running up too much overtime. Fuller employment helps the economy, but it helps employers too because overloading a single employee with too many hours of work is bad for employer, employee, and work quality.
5. There's plenty of time to prepare.
The new rule won't go into effect--if it does--until sometime in 2016. That gives employers lots of time to prepare. There will also be a comment period and no doubt a lot of questions to answers about how the rule will be phased in, and whether any changes will be made to apply the new rule to white-collar workers, most of whom are exempt from the existing rule.
Whether you agree that the new rule is a good thing or whether you hate it, there are a lot of questions yet to be answered and its fate is far from certain. We'll have to wait and see how it plays out.