Hindering worker opportunities

Congress passes laws that can upend entire industries, hinder worker opportunities, and raise prices on consumers. But when such laws impact Congress itself, lawmakers suddenly discover they share the same concerns as the public. The latest such clash with reality concerns costly wage standards.

On June 30, 2015, the Department of Labor (DOL) submitted a notice of proposed rule-making to modify overtime rules. The federal labor agency wants to make any salaried employee earning under $50,440 eligible for overtime, a huge increase from the current $23,660 threshold.

Initially, congressional Democrats thought this was a great idea. One hundred Democrats in both chambers sent a letter to President Obama in support of the proposed overtime rule. Meanwhile, many in the business community were dismayed at the negative impact on businesses and employees. Now the boosters of the rule change seem to rue their earlier support, since the rule also applies to the public sector.

Over in the private sector, junior managers would bear the brunt of the new mandate. They could soon find themselves demoted to hourly workers, as businesses scramble to avoid the higher cost burden. If a business can’t afford to raise salaried junior managers pay over the $50,000 plus threshold, demoting people to hourly status and prohibiting overtime may be the only viable solution. On the flipside, many hourly workers trying to move up the ladder will find the next rung suddenly out of reach.

The impact could prove long-lasting. Hiking the overtime salary threshold so high may have devastating impact on those workers’ career trajectories. Workers who were once on a management track and acquiring professional skills, may find themselves performing more routine tasks that do not help build the skills needed for career advancement.

Benefits will take a hit, too. When salaried employees are demoted to hourly status, they can lose benefits. For instance, many salaried employees receive employer-sponsored health care but hourly employees do not.
A loss of flexible schedules is also likely. For example, a salaried manager can leave work if a child becomes sick or an emergency arises during work hours without loss of pay. An hourly employee loses that pay when absent from work.

Compliance costs will pile on. Employers will be saddled with more paperwork to track compliance. In all, the rules make managing a business more difficult.

None of these problems worried cheerleaders in Congress — until they realized the new overtime salary threshold may apply to them. A recent Bloomberg BNA report found that House Democrats, some whom signed the letter of support to Mr. Obama, may have a hard time implementing the new overtime rules regarding their own staff.

“I don’t see how we could pay overtime” for the “17 or 18 people that each of us is allowed to have — that’s problematic for me,” declared Rep. Alcee Hastings, Florida Democrat.

Just like private-sector employers, if government imposes costs, public sector employers have to make it up somewhere else. Former Virginia Democratic Rep. Jim Moran, who is now a lobbyist, states that Congressional offices “don’t have any surplus funding in their MRA [Members’ Representational Allowance] account, but the funding is flexible, so what they would have to do is reduce the size of their staff” or cut back on constituent services.

Another concern is that Congressional staff making under $50,000 may have to be sent home promptly at 5 p.m., because there is not enough money in the budget to incur overtime expenses, leading to poor service for constituents.

Now that Congress is suddenly, intimately aware of the problem, it’s time to start exercising better oversight of federal agencies. Congress should make sure agencies seek small business input prior to issuing new rules with big consequences. And Congress should check agency claims concerning the supposed benefits of new regulations and hold those agencies accountable for making wildly inaccurate claims. Instead of waiting around to get burned by regulators again, Congress should start sparing everyone that pain now.

Originally posted at the Washington Times.