Workers, Stiffed

One recent spring day, I found myself before a congressional subcommittee testifying on behalf of increasing the federal minimum wage, which currently stands at $5.15. A bit of context here:

  • The minimum wage was last raised in 1997; inflation has just about fully eroded the value of that increase.
  • Congress will soon tie the record set during the Reagan years for the longest period without an increase (1981-1990, compared to 1997-?).
  • Since the average wage grew relatively quickly over these years, the value of the minimum wage relative to the average wage is at a 50-year low of 33 percent, a sure-fire recipe for a growing wage gap between low- and higher-wage workers.
  • After the last increase, the low-wage labor market soared, making it very tough (you'd think) for opponents to claim that minimum wage hikes kill jobs.

The panel was stacked four to one against an increase, staffed by the business lobby and the Heritage Foundation. The opponents' arguments were predictable -- recent history be damned, the increase will force small businesses to lay off countless workers. This even though the increase now under discussion -- a raise to $7 by 2006 -- would reach two million fewer workers than the last one did.

(By the way, does it bother anybody else that enemies of the minimum wage always claim to be motivated by concern for low-wage workers? Would it be so terrible if they confessed that what really bothers them is that higher labor costs mean less profit?)

The low point came when Todd Aiken, the Missouri Republican chairing the hearing, suggested that the whole idea of the minimum wage might be unconstitutional. That line of discussion was, mercifully, closed off when the Heritage Foundation witness noted that we kind of resolved that question 65 years ago.

Meanwhile, just a couple of blocks away, the good folks at the helm of the U.S. Department of Labor came out with their new, repackaged overtime rule, after having supposedly waded through 75,000 comments regarding their first proposal. Recall that we at EPI analyzed the original proposal and concluded that up to eight million workers could lose the right to overtime pay. Ultimately, a majority of lawmakers were convinced that the rule change was a mistake. In fact, moderate Republicans have now joined with Democrats three times (twice in the Senate, once in the House) to block or amend the new rule.

Some more context:

  • The proposal introduced sweeping changes that will make it easier for employers to deny millions of workers the right, which they now enjoy, to be paid time-and-a-half for work beyond 40 hours.
  • The Labor Department's estimate of who would lose the right to time-and-a-half pay was initially far too low and remains an egregious undercount; similarly, its estimate of workers gaining overtime rights is greatly inflated. (In the final rule, the DOL's estimate of the number who would gain the right to overtime pay -- 1.3 million -- is exaggerated by a factor of three.)
  • The final rule explicitly takes overtime protection away from whole groups of workers (e.g., team leaders) currently protected under the law.
  • The authors of the new rule utterly failed in their alleged bid to make overtime classification less opaque. The new, "simplified" rules, which run to 500-plus pages, will be the subject of lawsuits for generations to come.

We've argued with these officials endlessly, but to no avail; not even the Congress has been able to stop them from implementing their lousy rule. And for what? What's their motivation for gutting overtime protection?

And, really, why should anyone lose overtime pay? Why shouldn't we boost the minimum wage to ensure that the lowest-wage workers get a small boost from the growing economy? Compared to a radical restructuring of the tax code favoring investors over wage earners, these regulations are small potatoes. They mean a lot to their recipients, but they don't move the economy much. If anything, they tend to redistribute a bit of growth from profits to compensation, something we could use right now, given that the formerly jobless recovery has left these shares far out of balance.

Yet those of us defending overtime rights are fighting tooth and nail against an onslaught driven by business interests who are calling in their chits to an administration that has relentlessly done their bidding.

Why is this a problem? Because policies like the minimum wage and time-and-a-half pay for overtime (and we could add international labor standards here as well) were designed to soften the edges of free markets without killing the goose, and they've generally accomplished that goal.

Now, even with a bona fide recovery finally underway, policy actions and inactions of the past few years have left the typical worker more at the mercy of the market.

Remember, folks, we've devolved to a point where a congressman chairing a regulatory committee is questioning the constitutionality of the minimum wage. Unless we replace these single-minded deregulators with those who accept and appreciate the need for labor standards, the damage will only deepen.

Jared Bernstein is a senior economist at the Economic Policy Institute (EPI) in Washington, D.C. He and Lawrence Mishel, the EPI's president, each write a biweekly economics column, "Econ Chamber," for the online edition of The American Prospect. Their column appears here every other Thursday.

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