Five Million Americans Could Get a Raise This Summer

One of the lingering issues with this country's recovery from the Great Recession has been that wages have been slow to increase. That is why Democrats have been pushing to raise the minimum wage while Republicans in Congress (and their presidential candidates) have refused to take the matter up.

You might remember that in January 2014, President Obama announced his "pen and phone" strategy by which he would do what he could with executive orders and persuasion where Republicans refused to act in Congress. He opened his first Cabinet meeting that year with a request for proposals.

President Barack Obama offered a brief preview Tuesday of his State of the Union address, telling his Cabinet that he won’t wait for Congress to act on key agenda items in 2014...

“Overall, the message to my Cabinet, and that will be amplified in our State of the Union, is that we need all hands on deck to build on the recovery that we’re already seeing. The economy is improving but it’s in need of improving even faster,” Obama said.

From Secretary of Labor Tom Perez came the proposal that the President had the authority to raise the cap on workers who qualified for overtime pay under the Fair Labor Standards Act. Currently anyone making more than $23,660 a year does not qualify for overtime.

The Obama administration issued a new rule that would raise the cap to $50,440. These kinds of changes are subject to a whole host of processes - including the fact that the proposed rule be available for public comment for months. That period ended this week and the final rule (including changes from the public comments) has been sent to the White House for final review.

Once it completes that process (probably 4-6 weeks) and is made public, Congress has 60 days in which they can vote to disapprove of the change - which the President can override with a veto. Following those 60 days, the rule change goes into effect - probably by the end of July, if not sooner.

This new rule will mean that if an employee who makes up to $50,440 is expected to work more than 40 hours in any given week, their employer will have to pay them at the overtime rate - which is projected to affect approximately 5 million people. Of course, employers could chose to simply hire more workers - which will further reduce the unemployment rate. But given that it is now under 5%, that might be difficult. This is why the timing on this rule change is critical. If it had come when the unemployment rate was higher, it likely wouldn't have had much impact on wages.

So I'd suggest that we keep our eyes on this story over the next couple of months. President Obama once said that he plans to play through the fourth quarter of his term. Even as we all focus on the upcoming election this November, he is still hard at work on advancing the ball down the field.