Wages for the working class tie directly to the performance of the overall economy. When the largest group of consumers feels they have money to spend, they will do so. This spending may be to the detriment of their own quest for financial independence, but it also allows businesses to thrive. It’s always been the policy of more liberal politicians to encourage higher pay for low-wage workers, while it’s always been the policy of the more conservative to spur the economy by directly making it easier for businesses to profit.
Last year, President Obama called for an increase to the federal minimum wage, proposing first a gradual increase to $9 an hour, and later changing the proposal to increase to $10.10 an hour.
Another way to help workers in low-wage jobs is to ensure they are getting the overtime pay they’re entitled to. My first major job after graduating college was with a non-profit organization. It was a salaried position, but the salary was pretty low. It was enough so that I wouldn’t be considered living in poverty, but living expenses in New Jersey were, and continue to be, high. During most of the year, I worked eighty hours a week. It wasn’t always difficult work, but there was much to do and few people to do it. And everything was urgent.
At one point, I calculated how much I was getting paid per hour, and it was right around minimum wage. While that put me in a much better position than your average fast-food worker who also wasn’t paid for working overtime, it didn’t necessarily reflect the unique, specialized work I was doing. You make these kind of personal sacrifices when you’re working for a mission, but it’s not a situation that is right for a recent college graduate who sees financial stability as a goal.
Obama is asking the Labor Department to issue new rules pertaining to overtime, ensuring more people — though probably not those in the nonprofit sector — receive overtime pay. This could be even more effective than a minimum wage hike if the goal is getting more money into the hands of worker-consumers who might be able to use it to build wealth over time.
The most important factor in terms of overpay is ensuring companies are complying. If there are any companies breaking the law by withholding overtime pay, this needs to be addressed first. A group of McDonald’s workers have recently files a class-action lawsuit that claims that the company is avoiding paying employees full wages by using underhanded tactics, like not starting the clock until a customer enters the restaurant instead of when workers arrive to begin their day. Regardless of whether overtime is expanded, these incidents need to stop.
The usual reaction from the middle class to situations like that is, rather than encouraging businesses to adhere to the law, is to suggest those in bad working situations find a new job. Unfortunately, that’s not always a possibility. If a shift at McDonald’s is followed by a shift at a clothing store, and perhaps even a third job following that, all just to earn enough money to feed and shelter a family, it’s no surprise people can get stuck in low-wage jobs.
Obama’s new proposal would expand the requirement for overtime pay. Currently, employers can get around overtime laws by offering salaried workers more than $455 a week. That annual salary of $23,660 still falls beneath the poverty level, so there are people living in poverty who are not qualifying for overtime pay. Two states, California and New York, have set their own overtime exemption minimum at $600 per week. Raising this level can effectively raise the total wages for millions of workers.
It seems to me that most companies would want to attract the best employees, and one way to do that is to offer competitive compensation.
There was a revolving door of employment at that nonprofit organization where I worked. The organization would attract highly-motivated young people initially, but these same overachievers quickly found that their skills were in demand and that they had many more opportunities for personal growth elsewhere. In some cases, the labor market appreciated the same traits that made them great at their jobs in nonprofit, and compensated them appropriately, and in other cases, the individuals used their skills to build their own companies and enjoy the fruits of their own labor.
Small businesses tend to be unable to offer competitive compensation because profit margins tend to be tight. Many will look for other ways to attract the best employees, but non-monetary compensation can only go so far when you need to pay rent and buy food.
As regulations call for higher pay for low-wage workers, businesses will continue finding ways to avoid the increases. If McDonald’s is finding ways to shave hours off employees’ time cards, you can be sure other low-wage employers are doing the same.
Published or updated March 13, 2014.