OPINION:
Blue-state lawmakers aren’t satisfied with the Trump administration’s proposal to raise the minimum salary required for employees to be exempt from the overtime pay requirement by a whopping 33 percent. They instead want to see the salary minimum doubled, per a rule change finalized during the Obama administration but later suspended per a court ruling.
“In 2020, the salary level would have been approximately $51,000 a year. Unfortunately, a flawed district-court ruling blocked the department from implementing and enforcing the rule. Rather than defending the Obama-era overtime update in court, the Department of Labor is now proposing a new lower-salary level of about $35,000 a year to take effect in 2020,” says House Committee on Education and Labor Chairwoman Rep. Alma S. Adams, North Carolina Democrat.
The Obama-era rule, however, fails to consider cost-of-living expenses throughout the country — how much they vary from state to state — and would unilaterally impose a federal one-size-fits-all standard that may make sense in New York, but certainly not in Alabama or states where the cost of living is relatively low compared to more urban blue states.
As a New York Times article points out, $225,000 is enough to purchase a three-bedroom home with a pool in the Houston suburbs. In New York City, however, $225,000 is only enough to purchase a single parking space — no frills. Even then, there is a wait-list to simply get a chance at purchasing the limited New York City parking spaces. Why the hefty price tag on parking spots? A Goldman Sachs study estimates there is less than a single parking space available for every household in the Big Apple.
For reasons like this, federal minimum salaries shouldn’t be set so high that they cater to pricier parts of the country on the coasts but would have a devastating impact on the local economies and jobs in the South and Midwest. The same argument should apply when considering increasing the federal minimum wage. Federal law is a floor that needs to work everywhere in the nation. States can and do enact higher minimum-wage and higher minimum salary thresholds as they see fit.
States should not, however, be forced by the federal government to apply a blanket standard that doesn’t make sense in certain regions of the country. Larry Fox, a Hooters franchisee with locations in Alabama and Florida, says in a recent Wall Street Journal article that his employees make so much in tips that they earn a living wage.
A federal minimum-wage hike proposed by Rep. Terri Swell. Alabama Democrat, however, would eliminate tipped employees’ lower-base wage and require a restaurant to pay employees minimum wage in addition to tips. “A handful of states — Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington — have adopted this approach,” says Mr. Fox.
“Were it to take effect in Alabama, it would represent as much as a 600% increase in the hourly cost of paying a tipped employee to work for me. In pursuit of a ’living wage,’ Ms. Sewell could cause my employees to lose their incomes entirely by forcing me to shut down my business.”
It’s apparent that what works in one part of the country may not work in all parts of the country, and federal lawmakers have far too much power to impose burdensome regulations on states that never elected those same federal lawmakers in the first place. This is especially true when it comes to labor law and setting the federal minimum wage and setting federal minimum salary requirements for those entitled to overtime pay.
President Trump’s proposed 33 percent increase to federal minimum salary requirements for those entitled to overtime pay is more than reasonable, and policymakers should remember that the Fair Labor Standards Act needs to work throughout the country without adverse impact on local economies and jobs.
It must work in every state and every industry, in large cities and tiny towns, for small businesses and large, for profit and non-profit businesses. For this reason, regulators need to reject a one-size-fits-all approach to setting the federal minimum wage and federal salary minimums for overtime exemptions.
• Tammy McCutchen is a lawyer and former Labor Department administrator.
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