Frustrated by years of resistance from legislative Republicans to raise worker wages, Gov. Tom Wolf announced plans to lift the state’s salary threshold below which Pennsylvania salaried workers automatically receive overtime pay. The governor’s action is hard on the heels of efforts by my colleagues and I to address worker pay and make our wage and salary system equitable.
From pushing new dollars to increase worker skills through a comprehensive manufacturing initiative, bolstering education, making higher education more accessible and raising the minimum wage, more can be done to jolt the economic system and address systemic wage disparities. The action taken by the governor was a positive step, now let’s go further.
Why is action to address wage stagnation important? According to the Keystone Research Center, the top one percent gained far more – nearly 43 percent of the total increase in income — in the latest economic recovery than the rest of the ninety-nine percent.
Wage stagnation is a plague that has hobbled our economy. Wages for low-to-middle income Pennsylvanians have struggled to improve despite an economy that, when measured by most indices, is healthy – particularly from the perspective of wealthier individuals.
Salaried individuals who earn a minimum of $455 per week — $23,660 annually — and perform certain job duties in executive, administrative, professional and other occupations specified are not entitled to overtime pay should they work more than 40 hours in a work week. These rules were established in 1977. After 40 years, an overhaul is warranted.
Income inequity for salaried workers who put in extra hours would be addressed by a new regulation that the state Department of Labor & Industry anticipates releasing for public comment in March. It would be phased-in over four years.
The first step of the planned regulatory change would raise the salary level from the federal exemption ($455 a week – $23,660 annually) to $610 a week – $31,720 annually, on Jan. 1, 2020. The salary exemption level would rise to $766 a week – $39,832 on Jan. 1, 2021 and $921 a week – $47,892 in 2022.
After these adjustments, the salary exemption level would be updated automatically every three years. Additionally, the duties for executive, administration and professional workers will be clarified to make it easier for employers to know if a worker qualifies for overtime.
Increasing the income level will expand overtime eligibility to hundreds of thousands of Pennsylvanians who do not fall below the current baseline. According to the Wolf administration, the changes would, once started, extend overtime eligibility to 370,000 workers, with that population growing to 460,000 in four years.
The state plan is similar to an Obama Administration proposal in 2016 to update federal overtime rules – increasing the federal overtime salary exemption level to $47,476 and update every three years to reflect wage growth. This action was later blocked by the courts and the Trump administration has not acted to increase the federal baseline for overtime pay.
Other large states have already acted. California, New York and a handful of other states require overtime pay for salaried workers above the federal exemption level. They have also taken the initiative to increase their minimum wage rates above the federal wage floor of $7.25/hour.
Republicans and right-wing groups are criticizing this action, arguing the governor is bypassing the legislative process and that federal tax reform will increase worker pay — making this action unnecessary.
The Republican arguments completely disregard the fact that the governor, along with House and Senate Democrats, have repeatedly tried to engage Republicans on raising worker pay, such as increasing the minimum wage. Our efforts have, thus far, been fruitless. What’s more, federal tax reforms recently enacted have been shown to overwhelmingly benefit wealthier individuals rather than low- and middle-income workers.
Legislative Republicans need to recognize that wages for many working Pennsylvanians have been stagnant for far too long. State and federal policy decisions have largely benefitted the wealthy while wages for low-to-middle income workers have been left behind. The governor’s action is an encouraging step to help our workers. It has other added benefits. The change will do more than simply boost worker pay, it will stimulate new economic activity and tax revenues, increase productivity and boost service levels.
The new state policy will be a win for workers, employers and our state.