‘Employers Have an Incentive to Work People Long Hours’

Janine Jackson interviewed Ross Eisenbrey about overtime rules for the May 27, 2016, episode of CounterSpin. This is a lightly edited transcript.

Ross Eisenbrey: “From a public policy point of view, it was crazy to have some people working 60 or 80 hours a week while other people were standing in soup lines.” (image: Colbert Report)

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Janine Jackson: It’s no secret that those Americans who are working are working more hours for less pay than in decades–and suffering for it. And while it’s true wealthy people may be finding new clandestine ways to tuck money away, some of the core causes of working people’s problems are more out in the open, in the demonstrable erosion of worker wage protections.

This, our next guest’s group says, is a fixable problem. And one step in that direction came recently with the Labor Department’s issuance of a new rule raising the salary threshold below which salaried workers are automatically eligible for overtime pay.

Here to talk about the overtime rule, the pushback against it and where it fits in broader efforts to fight inequality is Ross Eisenbrey. He’s vice president of the Economic Policy Institute. He joins us now by phone from Washington, DC. Welcome to CounterSpin, Ross Eisenbrey.

Ross Eisenbrey: Thanks for having me, Janine.

JJ: What was the purpose of overtime rules originally, and how have they been turned to that purpose, or against it, over the years up till now?

“Employers tend to prefer…to hire a few people and work them longer hours. Especially if they don’t have to pay for the longer hours.”

RE: Well, they have the same purpose today that they had in 1938 when the federal law was enacted, which is to spread work, so that instead of having two people working 60 hours a week, you could have three people working 40 hours a week. And employers have an incentive to work people long hours and to have fewer employees, because there are all sorts of associated costs when you hire somebody, and you’re paying Social Security taxes and other taxes and so forth. So employers tend to prefer, many of them, to hire a few people and work them longer hours. Especially if they don’t have to pay for the longer hours–that actually becomes a huge incentive.

So the Fair Labor Standards Act in 1938 said if you work somebody more than 40 hours, you’ll have to pay time and a half–150 percent of their regular rate–for those additional hours. Employers have not liked this rule; right from the beginning, they’ve lobbied against it. And it does apply to not just hourly workers, but salaried workers. This is something most people don’t know, that if you’re paid a weekly salary or an annual salary, and you work more than 40 hours in a week, you can be entitled to overtime.

There’s one big exemption for professional, administrative and executive employees, and that was in the law right from the beginning, but was left to the Department of Labor to “explain, define and delimit,” as the law says. There are duties tests that show whether you are actually acting as an executive or a professional, and there’s also a salary test. And the salary test, right from the beginning, said if you make less than this weekly amount, you can’t be considered an executive and exempt, no matter what your duties are. So, over time, of course, as the Department revisits that regulation, they have to raise the salary level as overall salaries go up, and executive and professional salaries especially go up faster than the average.

So they did that over time until the ‘70s, and then they kind of stopped doing it. And from 1975 until 2004, the salary level was not increased, and, therefore, the tests essentially lost meaning. And we went from having 12.9 million, I think, employees automatically covered–salaried workers automatically covered–to three and a half million today. And that’s when the Labor Department acted recently and restored most of the value of that salary threshold, so that it now will cover about 16 million workers, which is a smaller percentage than back in the ‘70s, but gets us back to where most salaried workers can expect protection, can expect to be paid for their overtime.

JJ: The thinking behind that overtime pay was kind of to make sure that no one, except really high-level employees who had some other benefits–they had control over their time and their tasks–no one else besides them should be working overtime without being paid. Then there was the idea–almost a kind of work/life balance–that you have to be compensated if you’re going to work more than 40 hours a week.

RE: Yeah, there had been a 50- or 60-year movement, led by the labor movement, for an eight-hour day, and their slogan was “eight hours of work, eight hours of rest, eight hours for what you will.” It was sort of the original work/life balance slogan and movement. And Congress finally responded to it, only when we were in the middle of the Great Depression and 25 percent of the workforce was laid off, and it was a particularly compelling time to try to spread work. From a public policy point of view, it was crazy to have some people working 60 or 80 hours a week while other people were standing in soup lines.

JJ: That sounds a lot like today. I mean, we certainly would have a need or an impulse societally to spread work around at this time.

Let’s go now to the response. The coverage has taken the shape of, really, all these stories: There’s an announcement of a rule, and then you get the Chamber of Commerce or some other employer representative, who says this means the end of days. Can you address some of what is showing up as criticism? I’m reading that, for one thing, employers would raise wages to push people up to the limit where they don’t have to pay them overtime. And that sounds like it’s good, because they’re raising their wages, but ultimately it’s going to be bad.

RE: Well, that is clearly in my view a good thing, and I think every analyst agrees that one of the simplest responses for employers is to raise people over the threshold. And then all of the concerns that have been raised about, well, if I have to keep track of people’s hours, it’ll be a nuisance, it will restrict their freedom–those concerns go away, because once you’re above the threshold, they don’t have to track your time or pay you for your overtime.

JJ: Right.

RE: But then we have the National Retail Federation, which is one of the leading voices; they admit that employers will restrict hours for managers to whom they would otherwise have to now pay overtime, and shift work onto mostly part-time workers. And they say it will create 117,000 jobs. But they say somehow–I don’t understand this exactly–that that’s a bad thing, that we’re creating part-time jobs when we should be creating full-time jobs. But we wouldn’t be creating any jobs, you know, if it weren’t for the rule. We would just be overworking managers and not paying them for their time over 40 hours in a week. I don’t buy that.

JJ: Yeah.

RE: And then we have the universities who are putting on a fierce campaign up on the Hill, particularly in the Senate, saying if we have to pay our salaried workers overtime, we’ll have to raise tuition. And that’s a terrible thing, and you, Congress, will be responsible for it if you don’t stop this rule from going forward.

And my answer to that is, out of all the people at the university, the ones whose salaries we’re going to be concerned about are postdoctoral researchers who are now paid $43-, $45,000 a year, and are working 60 hours a week, effectively about $15 an hour? We’re worried about having to pay them overtime, when we’re paying football coaches $4 million, $7 million a year, we’re paying university presidents a million to $3 million a year, you know, a whole slew of vice-presidents and associate vice-presidents $200- to $300,000 a year. Come on. I find it really shameful.

JJ: It seems very clearly a question of priorities, and it would certainly help if it were more openly discussed that way. But another aspect that I want to bring up is a quote that I read, also from the National Retail representative, probably the same person. But I found it interesting, because he said, “By executive fiat, the Department of Labor is effectively demoting millions of workers.”

Now, this has to do with the idea that workers are going to be redefined from salaried to hourly, and that’s going to somehow demoralize them, even though they’re, you know, getting paid more, which is a pretty quaint idea. But what’s interesting to me is this idea that employers say the law does what in fact they do in response to the law, and reporters report it as though employers had no choice. So they say, well, the Department of Labor is doing this, when in fact employers always have a choice in terms of how they respond to a new regulation, don’t they?

RE: Yeah, that’s a great point. There’s nothing in this rule that says anyone has to be changed from a salary to an hourly basis. Because you can keep track of hours of salaried employees. We do and, in fact, oddly enough, the National Retail Federation’s own witness in congressional hearings, who was complaining about the rule before it was issued, said that she does keep track of the hours of her salaried employees. You know, when someone works 46 hours in a week, we keep track of that, and then we give them a day off or we give them a bonus; we reward them for their hard work. But she was talking about salaried managers, the very people that the rule would affect. So you’re absolutely right: There’s nothing in the rule that requires a change; it’s all within the discretion of the employer.

JJ: We’ve been speaking with Ross Eisenbrey, vice president of the Economic Policy Institute. You can find their work, including the Raising America’s Pay initiative, online at EPI.org. Ross Eisenbrey, thank you so much for joining us today on CounterSpin.

RE: Thank you so much for having me.