Do you want to know a dirty little secret about the U.S. Chamber of Commerce? While the Chamber claims to represent the interests of small businesses, the reality is that its primary focus is defending Big Business. Indeed, Chamber President Tom Donohue once stated that small businesses “provide the foot soldiers, and often the political cover, for issues big companies want pursued.”
Case in point: the Department of Labor’s proposed overtime rule, which would make an estimated 4.7 million salaried workers newly eligible for overtime. The Chamber declares in its 2016 agenda that it wants to create jobs and lift incomes. So you might think that the Chamber would be in favor of a rule that does both. You would be mistaken. As is so often the case with Chamber campaigns, the Chamber presents the proposed rule as a mortal threat to small businesses and non-profits.
First, a little bit about the proposed overtime rule. The existing overtime rule guarantees time and half for hours worked over a 40-hour workweek. It applies to hourly workers as well as to all salaried workers earning less than $23,660. For salaried workers earning more than $23,660 per year, the overtime requirement does not apply if their job duties require them to exercise independent judgment and managerial responsibilities. The proposed rule would lift the threshold to $50,440 per year in 2016 and would automatically update it each year according to either price or wage inflation.
The Chamber presents the proposed overtime rule as an “existential” threat to small businesses and non-profits. But the Chamber’s representations about the proposed overtime rule don’t stand up to scrutiny. In reality, the proposed overtime rule would only affect a minority of small businesses. Under the existing and proposed rules, small businesses and non-profits that generate business or sales revenues of less than $500,000 a year are exempt from paying overtime. A survey of small businesses showed that 86 percent of them recorded less than $500,000 a year in sales. Non-profits are even less likely to be impacted because they rarely generate business or sales revenue.
While the vast majority of small businesses and non-profits will not be affected by the proposed overtime rule, a minority will be. And yet even for these employers, the proposed rule will have a positive impact. As Nichelle Mitchem of United Community Ministries notes, “if we are unwittingly working people too hard, the quality of our client services may suffer as well. We welcome the opportunity these proposed regulations provide to make sure that just as we want our clients to find good jobs in our community, that the jobs at UCM themselves are good, fair and sustainable for our staff.” Ms. Mitchem makes a valuable point that all employers might want to consider: overworking people impacts the quality of their work and their productivity.
At the end of the day, the Chamber’s opposition to the proposed overtime rule has nothing to do with protecting small businesses and non-profits and everything to do with protecting the profits of Big Business. As venture capitalist Nick Hanauer points out, during the period from 1950 to 1980, corporate profits averaged 6 percent of GDP. Today, they average double that. Middle class incomes, on the other hand, have stagnated, and the erosion of the guaranteed overtime threshold has played a role in this stagnation. In 1975, the overtime threshold stood at $52,000 in today’s dollars and more than 60 percent of salaried workers were eligible for overtime pay. Today, the $23,660 threshold only covers 8 percent of salaried workers and would put a family of four below the poverty line. During this same time period, real median household income inched up from $50,000 in 1973 to $54,000 in 2014. That works out to an annual average growth rate of less than 0.2 percent or $100 extra each year. This is not the American Dream.
The proposed rule would help exert upward pressure on incomes in two ways. First, the millions of newly covered workers would suddenly be entitled to be paid for any overtime hours worked. And even if their employers decided to limit them to 40 hours, they would still benefit in that they would stop working long hours without pay. In short, they would gain either time or money. Time to spend with their families, go to school, or get a paying second job. Or more take home pay that would provide them with additional financial security.
Second, the proposed rule will help tighten the labor market, thereby providing employees with additional bargaining power and exerting upward pressure on wages. This will happen because it is likely that many employers would limit their employees to 40 hours rather than pay overtime. Employers will then be forced to hire new employees to do the additional work their current employees used to do during their overtime hours.
The post-war years were the glory years for the American economy. If America’s businesses could be so successful back then while operating under an overtime rule that covered the majority of salaried employees, then they can certainly be successful today under a proposed rule that would cover only 40 percent of salaried employees. Of course, as Hanauer suggests, in order to pay their workers the overtime they deserve (or hire additional workers to do all the extra work they were demanding existing workers do without compensation), these same large corporations might have to pay their top management and investors less. At a time in history when income inequality has reached staggering heights, the proposed overtime rule just might be an important part of the solution to creating a more just economy that rewards the many rather than the few. By pretending that the proposed rule would hurt small business, the Chamber claims to be defending the interests of the many; the reality is that it is defending the interests of the few.