Modernizing Federal Wage and Hour Policy

Chairman Byrne, Ranking Member Takano, and Subcommittee members, thank you for the opportunity to submit written comments about modernizing wage and hour policy. I am Pamela Villarreal, a senior fellow at the National Center for Policy Analysis (NCPA). We are a nonprofit, nonpartisan public policy research organization headquartered in Dallas, Texas.

The workplace has changed dramatically since the 1930s, yet most federal wage and hour policies are based on rules that were established under the Fair Labor Standards Act of 1938. While the FLSA has been amended over time, wage and hour policies have been slow to change with the diverse needs of the labor force. The participation rate of women has nearly doubled since 1950Union membership has been on the decline since the mid-1950s. U.S. manufacturing jobs have fallen by two-thirds since 1960, comprising about 8 percent of employment. Technological changes allow employees to work in non-office environments. Two-parent and single parent earner households have made it necessary for employers to be flexible in allowing workers to care for children or family members. Despite these changes in the workforce, federal wage and hour policies are mandated one-size-fits-all and do not allow employers to meet the various needs of their employees. Employee benefits law tends to be very rigid. In general, employees are not allowed to choose between taxable wages and nontaxed benefits.

A prime example of this is mandated benefits such as overtime pay policy. In general, hourly workers have very little flexibility with respect to work hours. For example, a working mother who takes off an afternoon to attend a child’s soccer game cannot make up the time by working additional hours in the next pay period. Instead, federal law forces her to receive less pay and fewer benefits in the week of the game, and forces the employer to pay overtime in the week when she makes up the time. Women are particularly affected by these restrictions. About 63 percent of women are hourly workers, totaling over 37 million women. Interestingly, federal law allows employees of the federal and state governments to do what the private sector cannot do. Government workers can choose between overtime pay and comp time. In 2001, 30 percent of state employees and 34 percent of federal employees opted for comp time instead of overtime pay. At a minimum, allow hourly employees in the private sector to have the same choices as employees in the public sector.

An NCPA study suggests there is a tradeoff between mandatory overtime pay and employee benefits.1 In 2004, the Bush administration raised the exempt salary level from $155 a week to $455 a week, but instituted a less restrictive duties test. The adjustment of the duties test meant that many preschool teachers, chefs and line supervisors of food preparation workers were exempted, because they were now considered executives, managers or learned professionals. Prior to 2004, many employers were required to pay overtime to individuals in these jobs. After the changes, employers were no longer required to pay them an hourly wage, rather than a set salary, or to pay them overtime for additional hours of work. The Economic Policy Institute and the AFL-CIO decried the move but, after 10 years, it is possible to see whether the loss of mandated overtime pay hurt or helped preschool teachers and chefs.

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