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Labor Department ‘cheat sheet’ puts screws to workers

[ Thanks to Sundra Flansburg for sending this article. ]

Labor Department 'cheat sheet' puts screws to workers

South Bend Tribune, January 18, 2004 [ link ]

by EILEEN APPELBAUM, KRT Forum

NEW BRUNSWICK, N.J. — Just when you thought the Bush administration's disdain for America's working families couldn't get any worse, along comes another cynical move to prove you wrong.

This time it's the Labor Department putting out tips for employers on how they can avoid paying overtime to low-income workers when the government's new rules on overtime pay go into effect in March. A cheat sheet, if you will, for employers.

The Department of Labor's new rules on overtime pay eligibility will have a serious impact on middle-class workers who will no longer be paid time-and-a-half when they work more than 40 hours in a week.

The Labor Department's own estimates reveal that as many as 2.7 million workers would be affected, while the Economic Policy Institute, a Washington think-tank, shows that more than 8 million workers could be shortchanged.

When Democrats and some Republicans on Capitol Hill voiced serious concern for the millions of middle-class workers who will be stripped of overtime pay by the changes, the Labor Department pointed to the benefits that would ostensibly shift to low-income workers. The trade-off, the administration argues, is that the new rules will make 1.3 million additional low-income workers earning up to $22,100 a year eligible for overtime pay.

Bush administration officials have repeatedly said that the rules changes will result in $895 million in increased income for low-income workers. But it's hard to see how these workers will ever see the money.

The ink is still wet on the new overtime eligibility rules, but Bush administration officials are already offering employers tips on how they can cheat these low-income workers out of their new overtime benefits. Suggestions include a “payroll adjustment” to convert workers' annual pay to an hourly rate, then cut the hourly rate so that annual pay is unchanged after overtime is paid.

Setting aside the protestations of a sheepish Labor Department spokesman — who said “We're not saying anybody should do any of this” — essentially employers are being advised to cut the pay of low-wage workers to avoid paying overtime.

Questions have been raised about the legality of following this advice, but there is no question about the morality. It's just plain wrong. And it doesn't make economic sense either.

The economy expanded at a rapid rate in the third quarter of 2003. Productivity in the business sector grew at an annual rate of 8.6 percent while wages were nearly stagnant. Profits, meanwhile, rose at an explosive 40 percent annual rate.

There may be an economic recovery under way, but low-income workers aren't benefiting. Indeed, unpaid and unreported long hours at both the top and bottom of the pay scale may be one reason for the economy's exceptional productivity growth.

Yet, rather than encourage companies to comply with Labor Department rules that make sure low-income workers — who are disproportionately women and minorities — are fairly paid when they work long hours, administration officials have chosen to instruct employers on how to thwart the new rules on overtime pay.

America's low-income working families have been lectured about personal responsibility and told they can't expect help from the government. Is it too much to ask the same of their employers?

Eileen Appelbaum is a labor economist at Rutgers University and director of the Center for Women and Work. She is co-editor of “Low Wage America: How Employers Are Reshaping Opportunity in the Workplace.”

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