Should salary level be raised for overtime?
July 19, 2015 at 10 p.m.
Updated July 20, 2015 at 6 a.m.
President Barack Obama made a call at the end of June for more low-salary workers to get paid overtime.
The president proposed to raise the threshold that guarantees overtime to full-time salaried workers. Currently, those who make up to $23,660 a year qualify to receive overtime pay if they are salaried. Under the proposal, those who make up to $50,440 would qualify.
Raising the threshold would extend overtime pay to almost 5 million people nationwide and an estimated 400,000 in Texas.
President Obama said this proposal is necessary because throughout the years the salary level that qualifies for overtime has not been adjusted for inflation. A salaried employee generally is someone with supervisory duties and is not paid by the hour.
Texas does not have state-level overtime laws or regulations, so the proposal would directly affect many workers in the state.
The comment period on the proposal is open until Sept. 4.
PRO: Proposal would boost economy, create jobs
The proposal to allow more workers to qualify for overtime would help boost the economy and create jobs, proponents of the proposal say.
The Obama administration says regulations for overtime pay have been changed only twice in the past 40 years and covers a different demographic of workers than it did at the beginning of that period.
For example, 62 percent of salaried workers were eligible for overtime pay if they worked full time in 1975. Now, 8 percent of full-time salaried workers qualify for overtime pay. The current threshold to qualify for overtime pay, $23,660, is below the poverty line for a family of four. More than 39 percent of workers who will be affected by this proposal have a bachelor's degree, according to numbers released from the White House.
Supporters of the proposal say workers will be getting money that they can in turn put back into the economy.
The economy would be stimulated because more workers would be receiving overtime pay and would in turn consume more, said Nazif Durmaz, a University of Houston-Victoria assistant professor of economics.
Judy Conti, federal advocacy coordinator for the National Employment Law Project, said, without regulation, employers are allowed to give workers titles of manager but 90 percent of what they're doing is hourly work.
"You had situations where people were barely making minimum wage and working 70, 80 hours a week," said Paula Brantner, executive director of Workplace Fairness, an online resource about workers' rights.
Brantner said by qualifying more workers for overtime pay, some employers will try to avoid paying overtime by hiring more workers.
Morgan Stanley, a multinational financial services corporation, estimates that 120,000 jobs will be created if this proposal is passed, Conti said.
CON: Regulation would cost employers billions, hurt workers
The proposal would cost employers much more in payroll and would affect workers' leisure time and benefits, some say of the President's plan.
Oxford Economics found in a study for the National Retail Federation that restaurant and retail employers would spend an additional $9.5 billion per year if they did not adjust workers' hours or hourly rates.
"In a salary situation, employers have to be fair, obviously; but not only that, they have to be able to make a profit," said Joe Humphreys, University of Houston-Victoria Small Business Development Center director. "And sometimes that requires employees to work over."
Government regulations on items, such as health care and the environment, already cost employers a lot of money, Humphreys said.
Another federal regulation would add to that list and could hurt businesses, he said.
Under the proposal, if employers were to pay the overtime wages, many workers would attempt to rack up more hours, said Nazif Durmaz, UHV assistant professor of economics.
Because of this, many workers would trade their leisure time for work, Durmaz said.
Instead of paying additional overtime money, businesses may pass costs along to customers, lower hourly wages or cut benefits and bonuses, according to the study.
"Employers pay what they need to pay to keep employees," Humphreys said. "There's more than pay to what keeps you at the job you're at. Different employers are going to do it different ways. When people work over, they have comp time; they have different things to make up for overtime."
Although jobs could be added instead of allowing workers to work overtime, the jobs would be part-time hourly workers and would erode low-level professional and administrative jobs, according to the National Retail study. This erosion would make it hard for companies to keep longevity with their employees.