FloridaCommerce Press Releases

ICYMI: Wall Street Journal OpEd by DEO Executive Director Jesse Panuccio: The Real Cost of Obama’s Overtime Mandate

Nov 14, 2015

TALLAHASSEE - The Labor Department trumpets rosy estimates to support its proposal to unilaterally add roughly five million workers to America’s overtime payrolls. Obama administration officials claim that the plan to more than double the salary at which employees become exempt from overtime—to $50,440 from $23,660—“will help shore up the middle class” for the low price of only $2 billion in its first year of implementation. 


But the administration refuses to allow others to check its math. The Florida Department of Economic Opportunity, the state agency that I lead, in August requested the specific data and methodology the Labor Department used to calculate its estimates. Our request was denied. Why would the Obama administration shield this information? 


With that question in mind, we conducted our own analysis of how the overtime mandate would affect Florida, relying on household survey data from 2014 to calculate the affected workers and total cost. To the extent that the Labor Department explained its methodology in the Federal Register, we replicated it as closely as possible. 


Our calculations suggest that the administration is overestimating the number of workers who will benefit from the mandate, while vastly underestimating its cost. 


The White House contends that the mandate would add 370,000 Floridians to overtime payrolls, but it provides no explanation of how it arrived at this figure. Our analysis shows that only 195,000 Florida workers will qualify. 


And the Labor Department’s $2 billion nationwide price tag? We find that paying new overtime to only those 195,000 Florida workers will cost businesses in our state $1.7 billion next year. That’s more than 80% of the Labor Department’s estimate for the whole country. 


The administration’s math seems suspect from the start. The Labor Department says employers will pay $1.48 billion in additional overtime wages to 4.7 million workers in the first year. This works out to $6.09 a worker each week. That’s less than an hour’s pay at minimum wage. Either the proposed mandate won't add very much to the average worker’s check—it won’t do much to “shore up the middle class”—or the administration is seriously playing down its cost. 


Take small businesses, those with 50 or fewer employees, which account for a third of Florida’s job growth. We estimate that each newly eligible employee will cost a small business about $5,000 more in overtime a year. Across the state, the total burden on small businesses will amount to $243 million. This will slow hiring. In the final calculation, the Obama administration’s mandate will have the perverse result of eliminating some of the jobs of the workers it purports to help. 


Compounding the economic harm, the administration’s plan would index the salary exemption, possibly to inflation, so that it would automatically increase each year. Historically, the Labor Department has raised the exemption level periodically when new wage data indicated that changes were necessary. But now the Labor Department claims that “overall agency workload, and the time-intensive nature of notice and comment rulemaking” make that approach too difficult. In other words, the Labor Department does not want to bother with hearing the objections of employers who will pay the bill.


Changes to the heart of the economic relationship between employer and employee should be considered individually and be subject to review and comment. This “time-intensive” due process exists for a reason; it helps protect the public from regulatory overreach. 


Last month the Labor Department closed the review period on the overtime mandate after garnering nearly 300,000 comments, many in opposition. But none of this input has given the administration pause. It intends to impose the overtime mandate beginning in January. This aggressive time frame offers employers little opportunity to adjust. As the implementation of the Affordable Care Act demonstrated—with the administration’s numerous delays of the employer mandate—businesses need to time to comply with federal rules that impose significant costs. 


In Florida, our view is that lowering the tax and regulatory burden spurs economic growth and increases prosperity for businesses and families alike. That’s the path our state has pursued, and for the past several years, our economic recovery has outpaced the nation’s. Over the past three years, private sector jobs have grown about four percentage points faster in Florida than in the country as a whole. The Obama administration’s belief that it can mandate its way to economic growth—and its imposition of new regulatory costs that eclipse any in recent history—is holding back job creation and America’s national recovery. The overtime mandate is more of the same.


Mr. Panuccio is the executive director of the Florida Department of Economic Opportunity.



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