A pending federal labor change that could affect 4.7 million Americans could have a larger impact on Southern states compared to the rest of the country.
The rule change – slated to go into effect in 2016 – could increase the threshold for overtime pay for non-hourly workers to $50,440 per year nationwide. Southern states – including Florida, Georgia and South Carolina – have some of the largest shares of their workforces affected by the proposed rule, according to estimates from the U.S. Department of Labor.
The proposed rule would more than double the salary threshold requiring businesses to pay their workers “time and half” for hours worked in excess of 40 per week. The current threshold – $23,660 annually or $455 weekly – covered 62 percent of the non-hourly workforce in 1975, compared with just 8 percent today, according to research from the left-leaning Economic Policy Institute.
Above the current threshold, workers may be eligible for overtime pay depending on job duties, but eligibility is often unclear, said the organization’s vice president, Ross Eisenbrey.
“We have calculated that tens of billions of dollars that are owed under the law are not being paid for workers,” he said. “It’s going to provide clarity, and probably provide rights, for 15 million people. … The only people who under the law are supposed to be exempt from overtime pay are essentially bosses and administrators.”
But the rule’s effects on business, employees and the larger economy are far from cut and dried. One line of thought says some businesses may hire more employees as a result of the rule, opting to shift overtime hours from an existing full-time employee to a new part-time worker to avoid paying time and a half for overtime. On the other hand, businesses could reduce employee salaries to keep take-home pay the same, said Greenville Chamber of Commerce President and CEO Ben Haskew.
“When there’s a change like this that causes employers to have to look at overtime pay, ultimately it’s their products and services that pay the bill,” said Haskew. “Labor cost, many times, is one of the highest costs in a business … it’s certainly something of concern.”
Trade groups and lobbyists have come out strongly against the rule change, saying reduced hours or base pay cuts would challenge the industry’s “ability to grow and preserve jobs,” according to a statement from the South Carolina Restaurant and Lodging Association.
“The leisure and hospitality segment of our economy is one of the leaders in job creation in our state. If implemented, the proposed rule changes would have a chilling effect on the continued growth of tourism, our state’s No. 1 industry,” said the group’s president and CEO, John Durst.
The National Retail Federation stated that rather than boost incomes, the proposal would see virtually no increase in worker take-home pay due to the tight economy.
“This plan isn’t about expanding the middle class – it’s about turning salaried professionals into clock-watchers,” stated David French, the trade group’s government relations vice president. “Retailers believe careers are the path to success, not time clocks.”
While tens of thousands of South Carolina workers and millions nationwide may seem like a huge chunk of the working population, overtime pay is only one lever the current administration has for the labor market, said Harry Holzer, professor of public policy at Georgetown University.
“While Obama can legislate the overtime rule, he can’t legislate a big federal minimum wage increase,” said Holzer, who said politics have largely stymied efforts for a national $10 minimum. “There are several levers that you can push, some of which would help this group, some of which would help that group, that altogether would have a real effect.”
If labor costs are important for businesses, they should also think about the cost of turnover, according to S.C. Small Business Chamber President and CEO Frank Knapp.
“The employees are a business’s most valuable assets. If you’re asking them to work for 55 hours for a $45,000 salary, that’s not a good way to take care of your employees,” he said, saying businesses could win in the long run with less turnover and more productive, happier workers. “A good business plan should not include abusing your employees.”