Here's why Obama's recent executive orders on overtime pay and increasing the minimum wage for federal contractors will not take us far enough to improve the lives of the majority of working Americans:
Small impact. It's tough to gauge the potential effect of the Obama's new overtime rules because the Labor Department still needs to rewrite them — a process that an agency spokesman says could take the bulk of 2014. ("We expect that the department will then publish a proposal for public comment later this year," says the Labor Department's Jason Surbey.) That means the proposal to change the rules, not even the policy itself, won't come out until late 2014.
Still, it's possible to do some back-of-the-envelope estimates on the number of workers this could help. The Economic Policy Institute recently released a detailed paper that argues the Labor Department should make eligible for overtime workers who earn $970 dollars a week or less. This would be a major bump up from the current law's threshold of $455 dollars a week. The paper's authors (including Jared Bernstein, the former chief economist to Vice President Joe Biden) estimate this would lift the wages of 5 million to 10 million workers. Meanwhile, increasing the minimum wage for federal contractors could help up to a couple of thousand workers.
At most, these two executive orders, if fully enforced, will benefit roughly 10 million working Americans. For context, as of 2012, there were 103 million Americans working full-time and year-round, according to the latest data from the U.S. Census Bureau. That's not the worst stat, but it also not going to entirely make up for stagnant wages and a labor market that continues to work better for companies than for American workers.
Nothing will happen right away. The other rub about the two executive orders is that they won't go into effect right away, probably not even before the 2014 midterm elections. If the Labor Department is not planning to even release a proposal of its overtime pay plans until later this year, then we're potentially looking at very late 2014, even 2015 as a time frame for when this actually becomes policy. The same goes for the increase in minimum wage for federal contractors. That order only applies to new contracts issued by the government moving forward.
Enforcement. Both executive orders require the Labor Department to enforce them, and it's unclear if the federal agency has the manpower. Can it keep tabs on all future federal contractors to guarantee they pay the higher minimum wage of $10.10? And what about enforcing the more nuanced overtime rules, which depend on the classification of the worker, as well as the amount of money he or she makes per week? "That's millions of small establishments that will be effected by this. They will be hard to monitor," says Harry Holzer, a professor of public policy at Georgetown University and former chief economist at Labor. Anecdotally, we're already seeing reports that some workers who live in states that raised the minimum wage on Jan. 1 are not seeing those extra earnings show up their paychecks. The new rules could follow a similar script.