Higher wages, more jobs not from Trump pro-business economy; instead credit goes to DOL for overtime exempt rule change

Business-beholden members of Congress are falsely boasting that their 2017 tax law has been responsible for less unemployment and slightly higher hourly wages.

They praise themselves and President Donald Trump for cutting corporate rates from 35% to 21%, eliminating most taxes on dividends and capital gains, doubling the exemption for inheritance tax, and dropping the tax for corporate foreign profits – laundered for years overseas – from 35% to 15%.

The most onerous claim is that because these tax cuts made rich people richer, the wealthy decided to hire more workers and give generous raises. It’s what they call: “trickle down economics.”

In practice none of this pollyana politics is true, logical or based upon any evidence, except the rantings of wealth-snobs who believe that even a little more – is too much – for the little people. Cake anyone?

The 2017 tax cuts for the upper class and their investments has led to record profits for Wall Street firms (some up 50% just this past year). Overall corporate wealth is burgeoning – indicated by our booming stock market. The more profits, the more valuable a business becomes, and the higher its stock price.

If the “trickle” had been used for workers, profits would have stabilized or dropped. Stock prices would have remained steady or slightly lower, as company valuations were not boosted with more tax cut induced dividends and reinvestment.

The real force behind more jobs, lower unemployment and higher wages is the U.S. Department of Labor (DOL) decision to increase the minimum overtime threshold salary for low-level managers from $455 to $684 a week – a $189 raise equaling $4.73 more an hour. Old rule was $23,660 annually. Under the new law it’s $33,280, an added $9,620.

This 50% pay hike went into effect on Jan. 1, 2020, and U.S. businesses have been adjusting for at least a year, changing employment levels to eliminate the new rules’ more expensive overtime remuneration, and raising wages and salaries to reflect this new pro-worker reality.

Trickle Theory Works Well for the “Smart” Folks!

Until this month you could claim someone was exempt from overtime if they exceeded $455 weekly ($11.38 an hour). As exempt employees, you might require them to work six days or seven days a week, 12 or more hours a day, and still only receive their $455. Someone working under them could be paid $10 an hour and earn more than them with just four hours overtime (40 x 10 + (1.5 x 4 x 10)).

The old rules even allowed you to pay a “manager” that $455, and require them to supervise hourly workers earning $20 an hour, $30, $50, the sky was the limit.

This law went into effect in 2004 when President George Bush and his GOP-controlled House and Senate changed the rules on how overtime exemption was calculated. That’s when the $455 limit was established and the dollar amount has not changed until now.

Consider that the $8,060 salary limit set in 1975 was the equivalent of $38,301 today — far above last year’s $23,660 threshold. Every year, more and more Americans have been working extra hours for free.

The new overtime rule is less than the President Barack Obama decision in 2014 to double the salary threshold to $47,000. In a subsequent legal dispute, a federal judge in Texas ruled the change invalid in 2017, claiming that the DOL “exceeded its authority.”

$15 Minimum Wage Affects Millions from Bottom Up!

Why the change from the DOL under the current Republican administration? Corporations are facing higher local minimum wages as the $15-an-hour movement spreads.

Anticipating a $15 level in most jurisdictions, the DOL cleverly sets the new overtime exemption minimum rate at $17 an hour. That requires the lowest wage worker to need six hours overtime to reach the same weekly pay as the manager.

How does this work in the real world?

Imagine that you have 20 hourly workers at $10 an hour, plus four working managers at $455 salary with each “boss” putting in ten hours a day, or 50 hours a week. Under the new rules the managers became employees, and are entitled to a group’s total of 40 hours overtime pay at 150% of the usual rate.  At this point it’s cheaper to hire an additional employee for 40 hours, instead of paying overtime’s (1.5 x 40) 60 hours additional wages.

On a national scale the result of adding employees, instead of paying overtime, is more jobs and a lower unemployment rate.

But some managers are obviously just that, and suppose they now earn $700 a week. Won’t they ask for and receive a raise by pointing out they are just earning only $16 a week more than the minimum pay of $684, when there used to be a gap of $245?

All Workers Should Be Fairly Valued!

Higher wages for managers means more money overall for middle class consumers.

If managers do see their wages jump 1.5 times their old rate, won’t the people working under them also demand an equivalent percentage? They may not get the whole amount, but they will most likely receive a substantial increase.

There are currently 120 million U.S. workers, and 50 million of them are overtime exempt employees.

But imagine if the 2017 minimum of $47,000 had not been shot down by U.S. District Judge Amos Mazzant, who claimed the salary level was set too high. The judge ignored that the DOL spent two years working on the rule and reviewed nearly 300,000 public comments before adopting it.

That change would have more than doubled the salary minimum and immensely improved the lives of tens of millions of families.

The new law also allows some categories of workers not subject to either the minimum wage or overtime exempt rules:

Exemptions from Both Minimum Wage and Overtime Pay:

  1. Executive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and employees in certain computer-related occupations (as defined in DOL regulations)
  2. Employees of certain seasonal amusement or recreational establishments, employees of certain small newspapers, seamen employed on foreign vessels, employees engaged in fishing operations, and employees engaged in newspaper delivery
  3. Farm workers employed by anyone who used no more than 500 “man-days” of farm labor in any calendar quarter of the preceding calendar year
  4. Casual babysitters and persons employed as companions to the elderly or infirm

Exemptions from Overtime Pay Only:

  1. Certain commissioned employees of retail or service establishments; auto, truck, trailer, farm implement, boat, or aircraft sales-workers; or parts-clerks and mechanics servicing autos, trucks, or farm implements, who are employed by non-manufacturing establishments primarily engaged in selling these items to ultimate purchasers
  2. Employees of railroads and air carriers, taxi drivers, certain employees of motor carriers, seamen on American vessels, and local delivery employees paid on approved trip rate plans
  3. Announcers, news editors, and chief engineers of certain non-metropolitan broadcasting stations
  4. Domestic service workers living in the employer’s home
  5. Employees of motion picture theaters
  6. Farm workers

Partial Exemptions from Overtime Pay:

  1. Partial overtime pay exemptions apply to employees engaged in certain operations on agricultural commodities and to employees of certain bulk petroleum distributors
  2. Hospitals and residential care establishments may adopt, by agreement with their employees, a 14-day work period instead of the usual 7-day workweek if the employees are paid at least time and one-half their regular rates for hours worked over 8 in a day or 80 in a 14-day work period, whichever is the greater number of overtime hours
  3. Employees who lack a high school diploma, or who have not attained the educational level of the 8th grade, can be required to spend up to 10 hours in a workweek engaged in remedial reading or training in other basic skills without receiving time and one-half overtime pay for these hours. However, the employees must receive their normal wages for hours spent in such training and the training must not be job specific
  4. Public agency fire departments and police departments may establish a work period ranging from 7 to 28 days in which overtime need only be paid after a specified number of hours in each work period

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