Like minimum wage increase, new overtime rule long overdue

July 5, 2015

Hard work should pay off. That belief is at the heart of the American dream.

It also is why the U.S. Labor Department’s plan to make more salaried workers eligible for overtime pay is good news for both workers and the overall economy.

Like an increase in the minimum wage, it is long overdue.

Since 1938, federal law has required hourly workers to be paid time-and-a-half for each hour worked beyond 40 hours per week. There is an exception for managers and professionals, who are presumed to get good pay in return for more flexibility and, often, longer work weeks.

But here’s the problem: the salary level at which that exemption kicks in has been increased only once in 40 years.

In 1975, more than 60 percent of salaried workers were eligible for overtime pay. Because of inflation, that figure has fallen to 8 percent, according to a recent analysis by the Economic Policy Institute.

As a result, salaried “managers” who earn as little as $23,660 a year often work many extra hours for no extra pay. Some end up earning less per hour than the hourly employees they manage. This happens most often in retail and service industries, such as fast food.

This antiquated threshold salary of $23,660 is below the poverty line for a family of four, which is now set at $24,250. As a result, some of these managers are eligible for public assistance, which means taxpayers are directly subsidizing business profits. That makes no sense.

President Barack Obama last year told the Labor Department to review the overtime rule. That resulted in a proposal, announced last week, to raise the salary threshold for workers exempt from overtime next year to $50,440, returning it to roughly the 1975 level, accounting for inflation.

The new rule calls for that threshold to rise over time with inflation, linking it to the 40th percentile of income, which is where it was when the Fair Labor Standards Act became law in 1938.

The White House says the rule change would increase pay for nearly 5 million workers in the first year, 56 percent of whom are women and 53 percent of whom have a college degree.

The president’s action, which does not require the approval of Congress, has drawn howls from business interests and the politicians who receive their campaign contributions and loyally push their agendas.

As with almost every regulation Obama has proposed to help average workers, expand health insurance coverage and clean up the environment, these politicians argue that it will “kill jobs” and hurt the economy. In fact, the opposite is true.

Under this rule, if businesses don’t want to pay overtime to low-salaried managers, they can hire more hourly workers at straight time. That also would give those managers more time for a second job to supplement their income or spend time with their families, as they choose.

Opponents argue that businesses can’t afford to pay workers more, that this isn’t a good time. Have you ever known them to say anything else?

The United States has had 63 straight months of job growth, with businesses creating more than 12.5 million jobs. The Labor Department reported Friday that 223,000 jobs were created in June and the unemployment level fell to a seven-year low of 5.3 percent.

But the problem is that, for nearly four decades, wages have not kept pace with improvements in worker productivity. They haven’t even come close. Middle-class pay has stagnated and been eroded by inflation.

Meanwhile, stock prices are near all-time highs. Executive compensation has soared into the stratosphere. And corporate profits have roughly doubled over the past three decades, rising from 6 percent to 12 percent of gross domestic product.

A recent study found that 90 percent of income growth since 2009 has gone to the richest 10 percent of families.

Why has recovery from an economic crash caused mostly by financial speculation been so slow and uneven? Here is a big reason: consumer spending is the largest driver of the economy, and most people don’t have much extra money to spend.

Like a minimum wage increase, this would help fix that problem and show average Americans that hard work does pay off.


Want to improve the economy? Narrow the growing wealth gap

December 21, 2014

Many politicians and business executives like to complain about the slowness and fragility of the economic recovery. Then they push policies to keep it that way — or make it worse.

What they don’t seem to understand is that the best way to improve the economy is to put more money in the pockets of average people who will spend it.

Instead, these politicians and executives oppose raising the minimum wage, which has been $7.25 an hour since 2009 and losing ground to inflation for decades. A low minimum wage keeps wages just above it depressed, too.

Then there are the perversely misnamed “right to work” laws. Their real purpose is to weaken what is left of labor unions so that big business, which already seems to have bought control of government with campaign contributions, has nobody to challenge its power.

Add to that efforts to repeal Kentucky’s “prevailing wage” law, which would cut the pay of working men and women who build public construction projects.

The biggest drag on the economy — and perhaps the biggest threat to America’s long-term prosperity — is the widening wealth gap between the haves and have-nots. Narrowing the gap is in everyone’s best interest, whether they realize it or not.

The prevailing-wage law became a flashpoint last week at a state legislative meeting. The law is designed so that public construction projects pay wages that reflect those in the local community. But as so much of the construction industry has become non-union, critics argue that the law puts too much emphasis on higher union wages.

The Legislative Research Commission compiled a report showing that construction workers on state projects earned $8 an hour more than those on private projects. Workers on 12 school district projects earned $11.37 an hour more.

But critics objected to the analysis, saying it looked only at labor costs, not total project costs. Might more skilled, better-paid workers complete projects faster and better? Besides, higher wages help strengthen local communities.

The irony is that most of the legislators who think construction workers are overpaid have little to say about the sometimes obscene compensation policies at state government’s highest levels.

Kentucky’s public pension systems are among the most under-funded and least transparent in the nation, yet they provide rich benefits for part-time legislators and other high-ranking officials smart enough to game the system.

And then there is the case of the Kentucky Community and Technical College System president, long the nation’s highest-paid community college leader. He recently retired with a $300,000 handshake.

Warren County’s Fiscal Court last week approved Kentucky’s first county “right to work” ordinance, although it is unclear if it is legal under state law.

Republican legislators and chambers of commerce would like to make Kentucky a “right to work” state. That would make Kentucky more “friendly” to companies that want to come here and pay low wages. Studies show right-to-work states often do have faster job growth — as well as lower overall wages and higher poverty rates.

Since Congressional Democrats failed to overcome Republican opposition to raising the federal minimum wage, a statewide minimum-wage increase has been proposed by Democrats in the Kentucky General Assembly. Last Thursday, Louisville’s City Council raised the local minimum wage to $9 by 2017 on a 16-9 party-line vote.

Predictably, business groups and right-wing activists argue that would cause huge job losses — even though it has never happened with previous minimum-wage increases.

Since Ronald Reagan was elected president in 1980, economic policies and trends have largely been based on “trickle-down” economic theory — the notion that if the rich get richer, everyone else will prosper, too. Trouble is, it hasn’t worked that way.

Wealth inequality in the United States is now higher than at any point since the 1920s. The vast majority of all income growth is going to the rich. Corporate profits and the stock market are at record highs. But average workers are losing ground, and the overall economy remains sluggish.

This is a global problem, too, prompting Pope Francis to take up the issue last year in a papal statement worthy of a few amens.

“Some people continue to defend trickle-down theories, which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world,” the Roman Catholic Church’s leader wrote. “This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power.”


Labor Day a reminder of how working people are falling behind

August 31, 2014

Each year on Labor Day, I think of Myles Horton and something he once told me.

Horton started Tennessee’s Highlander Center in 1932 and spent most of his 84 years crusading for racial, environmental and economic justice. Rosa Parks called him, “the first white man I ever trusted.” He was a mentor to the Rev. Martin Luther King Jr.

During an interview in the 1980s, I asked Horton about his focus. “Working people,” he replied. “People who work for a living rather than own for a living.”

Labor Day celebrates Americans who work for a living, which is most of us. But each year there seems to be less to celebrate. Stock markets, corporate profits and executive compensation are hitting record highs. But at the other end of the spectrum, there aren’t enough good jobs for people who want to work.

There has been a lot of political talk about job creation, but a more important issue is the quality of jobs. More and more people are working hard at full-time or several part-time jobs and still can’t earn a decent living.

The Kentucky Center for Economic Policy, a non-profit think tank in Berea, issued a report last week that offers a gloomy assessment of recent trends. The full report is at Kypolicy.org, but here are some key findings:

Kentucky is experiencing job growth, but still needs 80,800 jobs to get back to the pre-recession 2007 level and accommodate population growth since then. Nearly one in four Kentucky part-time workers say they would rather have full-time jobs.

A lack of jobs has led to a decrease in the labor force as many Kentuckians have given up looking for work. One third of Kentucky’s unemployed people have been that way for a long time.

Wages are depressed by high unemployment levels. The late 1990s, when the unemployment rate was below 4 percent, was the only time in the past 35 years when Kentucky workers’ real wages actually grew.

The inflation-adjusted median wage has fallen 8 percent since 2001, and low-wage workers’ pay has fallen by 7 percent. Much of that is because higher-paying jobs that produce goods — especially in manufacturing — have been replaced by service jobs. Many service jobs pay low wages, which have been further depressed by a $7.25 hourly minimum wage that hasn’t been raised since 2009.

What are some solutions? First, the center recommends long-needed reform in Kentucky’s 1950s-era tax code to reflect the modern economy. That would provide more revenue for the state to invest in education and infrastructure, both of which would create jobs and spur economic development.

Another good idea the center recommends is raising the minimum wage. The value of the minimum wage has been eroded by inflation to the point that it is too little for an individual, much less a family, to live on.

What is especially obscene is huge, profitable corporations that pay workers so little they are eligible for public assistance. That leaves taxpayers subsidizing the profits of companies such as Wal-Mart and McDonald’s. Raising the minimum wage would save taxpayers money.

Opponents argue, as they always have, that increasing the minimum wage costs jobs and raises prices. But evidence shows those effects are minimal. A higher minimum wage, which also pushes up pay for workers just above it, puts more money in the pockets of people who will spend it, which boosts the economy.

Conservatives argue that Kentucky could spur economic growth by enacting anti-union laws and loosening environmental regulations. But that kind of growth does more harm than good. Pollution creates health problems and lowers the state’s quality of life. Anti-union laws boost business profits at the expense of workers.

Cynically named “right to work” laws make it harder for workers to organize for higher wages and better working conditions. States that enact those laws generally have lower average wages and more poor people than those that do not.

Similarly, repealing “prevailing wage” laws would make public construction projects cheaper, but only by taking money out of the pockets of the people doing the work.

It is no accident that the decline of the middle class since the 1970s has mirrored the decline of organized labor, which had a big role in creating the middle class in the first place. More and more of this nation’s wealth is rising to the top at the expense of everyone else.

Yes, we need to create more jobs. But we need to do it in ways that will improve the fortunes of people who work for a living and not just those who own for a living.

 


Laborers’ wages are nothing to celebrate this Labor Day

September 2, 2013

Labor Day this year falls five days after the 50th anniversary of the March on Washington for Jobs and Freedom, which is remembered as a civil rights demonstration that included the Rev. Martin Luther King’s “I Have a Dream” speech.

But march organizers had another issue, as well. They wanted federal minimum wage rates, which in 1963 were $1 and $1.25 an hour, raised to $2. Anything less, they argued, would not provide a “decent standard of living.”

What kind of buying power would those minimum wages have today?

According to the U.S. Bureau of Labor Statistics’ inflation calculator, a 1963 dollar would now be worth $7.63. That is 38 cents more than the current minimum wage of $7.25, which was last increased in 2009.

An hourly wage of $1.25 in 1963 would now be worth $9.54. That is 54 cents more than the minimum-wage increase President Barack Obama is now seeking.

The $2 minimum wage sought by marchers a half-century ago would now be worth $15.27. That is 27 cents more than what fast-food and other low-wage workers have demanded recently in wildcat strikes across the country.

What’s the chance for any significant increase in the minimum wage? Slim to none, thanks to opposition from Republicans in Congress.

A national public opinion survey by the Pew Research Center and USA Today found that 71 percent of Americans support raising the minimum wage to $9, as the president has proposed. Only 26 percent oppose it.

But it doesn’t seem to be an important issue for Congress. Perhaps that is because the average senator is worth about $11 million, while the average House member’s wealth is about $7 million, according to the nonpartisan Center for Responsive Politics.

Many opponents of raising the minimum wage argue that few people actually earn that little. That is somewhat true. But minimum wage workers make up a large share of the 10 million Americans the BLS classifies as the “working poor.” About 4 percent of all full-time workers are officially classified as poor.

Minimum wage increases also tend to push up other workers’ wages, something that is sorely needed. Wage stagnation among all but the wealthiest Americans may be the biggest obstacle to real economic recovery.

Consumer spending accounts for between 40 percent and 70 percent of the economy, depending on how you calculate it. Most people have less to spend than they used to because the value of middle-class wages has been falling for more than three decades, despite huge gains in worker productivity. Meanwhile, corporate profits and shareholder returns have soared, compensation for top executives has risen into the stratosphere and corporate cash reserves are at historic highs.

Opponents of raising the minimum wage argue, as they always have, that higher pay means fewer jobs. But a recent report by the nonpartisan Economic Policy Institute cites research by prominent economists that disputes that argument.

Robert Reich, who was Labor secretary under former President Bill Clinton, wrote recently that many large employers of low-wage workers could well afford to give them raises. He cited two big examples.

Wal-Mart, the nation’s largest employer, has seen net income (profit) rise steadily in recent years while the company has maintained a gross profit margin of more than 24 percent. Wal-Mart’s net profit last year: $15.766 billion.

Reich noted that Wal-Mart CEO Michael Duke is paid $20.7 million a year — more than 1,000 times the earnings of a typical Wal-Mart worker.

McDonald’s Corp. net income last year was $5.465 billion, more than double its profit five years earlier. Reich said McDonald’s CEO Don Thompson’s compensation totals $13.8 million — about 800 times the earnings of a typical worker at one of its fast-food restaurants.

A major trend in American business for the past three decades has been to keep labor costs — the wages of average workers — as low as possible to boost profits, executive compensation and shareholder return.

The trend has been supported by the “business friendly” laws and policies of federal and state governments. You hear a lot of talk about the importance of job-creation. But, far too often, the jobs now being created pay much less than what is needed to support a middle-class family.

As Americans celebrate another Labor Day, many average laborers might conclude that the system is stacked against them. And they would be right.


Economic slump reflects middle-class decline

September 5, 2011

Happy Labor Day.

Chances are, if you are one of the majority of Americans who labor rather than own for a living, you aren’t feeling very happy.

This hasn’t been a good year for middle-class workers, much less for the poor. In fact, it hasn’t been a good three-plus decades.

Economic and political forces have hammered working people. Real income for the bottom 80 percent of Americans has been stagnant or falling since the late 1970s. Few paid much attention until the 2008 financial crisis, because the trends were masked by rising personal and government debt.

During these years of middle-class decline, it has been fashionable to bash labor unions. Perhaps that is because people take for granted the things unions fought to make part of the American workplace — the eight-hour work day, overtime pay, the minimum wage, unemployment insurance and safe working conditions. Unions led the fight to end child labor and discrimination against minorities and women. They played a big role in creating Social Security and other government safety-net programs.

After World War II, as much as 25 percent of the work force belonged to unions, and their contracts set standards by which many non-union workers benefited. Last year’s census showed union membership at 11.9 percent, down from 20.1 percent in 1983. America now has 14.7 million union members — roughly the same number of people now unemployed.

Unions have plenty of flaws; all institutions do. But they serve an important role in balancing the power of business. Power without balance becomes abusive. We have seen that with business, labor, government and even churches. It is no coincidence that the decline of middle-class income and security over the past three decades has followed the declining influence of organized labor.

Statistics show that all real income growth since 1979 has gone to the wealthiest 10 percent to 20 percent of Americans, with the wealthiest 1 percent gaining the most, by far. Wealth inequality is the highest it has been since the 1920s.

The deep economic hole that politicians are debating how to fill was caused mostly by financial speculation, unfunded wars of choice and irresponsible tax cuts. But you hear little talk in Washington about a crackdown on Wall Street, real tax reform or scaling back military adventurism.

That is because wealthy interests have largely taken over both political parties. Democrats still give lip service to the middle class and poor, but the GOP has become a wholly owned subsidiary of corporate America.

President Barack Obama speaks Thursday to a joint session of Congress. He will propose a plan aimed at creating jobs, reviving the economy and improving his chances for re-election. Republicans will be against whatever he proposes, because they don’t want the economy to improve anytime soon. If the economy improves, they have less chance of taking back the White House.

The Republican prescription for economic recovery is to do more of the things that wrecked the economy in the first place: less business regulation and more tax cuts. The problem with trickle-down economics is that it only makes wealth trickle up, as the past three decades have shown.

Republican leaders also want aggressive debt-cutting austerity, but only for those who can least afford it. As history has repeatedly shown, this strategy only makes a weak economy weaker.

But it all depends on your perspective. The Main Street economy where most of us live and work is stuck in neutral. But Wall Street profits, corporate cash reserves and executive compensation have never been better. Times are good for the people whose campaign contributions and lobbying have all but shut average Americans out of the political debate.

The public is angry, and Tea Party activists are the most visible reflection of that. But their misguided philosophy plays right into the hands of big business. Why else do you think billionaires are funding those Tea Party organizations?

I am usually not a pessimist, but I see little hope for recovery as long as the interests of corporate America are so divergent from those of working Americans. The economy won’t improve until average people have more money to spend. Until the middle class finds political voice to demand that things change — as organized labor did a century ago — things won’t change.