Obama overtime pay proposal raises concerns in Indiana

July 6, 2015

Owners of Indiana small businesses say a proposal by the Obama administration to give overtime pay to up to 5 million more people could force them to cut workers' hours or make changes to salaried employees' pay structures.

President Barack Obama said June 29 that he wants to raise the threshold that requires salaried employees to be paid overtime. Currently, workers with "managerial authority" can't receive overtime if they earn more than $23,660 a year. Obama's proposal would raise that amount to $50,400 a year, or about $970 a week.

The U.S. Department of Labor says the change would affect about 100,000 workers in Indiana. But state Department of Workforce Development spokesman Joe Frank said there's no real way to determine how many people would be affected.

Frank told the South Bend Tribune that owners fear the change would make it too costly to do business or could force them to cut jobs or reduce workers' hours.

"It's actually going to do more harm," Frank said. "It's just not going to have the effects they are looking to have."

Obama says the current overtime threshold undercuts the intent of the overtime law. The White House says the overtime rules covered 65 percent of salaried workers in 1975 but cover just 8 percent today.

Mark McDonnell, owner of LaSalle Grill in downtown South Bend, called the proposed rule "devastating." He said his food costs have risen by 33 percent in the last two years and that he hasn't taken a raise in 16 years. The new overtime rule would raise the cost of doing business and prevent him from having salaried employees, he contends.

Labor economics expert Teresa Ghilarducci, who taught at the University of Notre Dame for 25 years until joining the New School in New York City, disagreed. She said the rule would target businesses with a cheap labor model and would force those with bad practices to meet standards.

"People are fed up," Ghilarducci said, calling Obama's rule monumental. "All of this is affordable. None of this is going to hurt businesses."

Christopher Porter, an associate professor with Indiana University's Kelley School of Business, acknowledged that the proposal would be costly for employers at the beginning but said the investment in employees would outweigh the negative.

"At the end of the day, people want to be paid for the effort that they put into their jobs," Porter said. "When employers are seeking to do the right thing, they are going to benefit from this."


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