Abington economist: Expanding overtime pay a win for workers, employers, economy

New Lonnie Golden
Credit: Regina Broscius

An estimated 5 million more Americans will become eligible for overtime pay in 2016 under new regulations announced by President Barack Obama this week. The action more than doubles the salary cap under which most workers would qualify for overtime,to $50,440.

Lonnie Golden, economics professor at Penn State Abington, called the new regulations "necessary and welcome in the current economic, political, and legislative environment." He recently published research on the economic and social impact of such a move.

Golden said it's understandable that employers utilize the existing executive, administrative, and professional exemption from overtime to minimize labor costs, but its use has gone beyond the original intent.

"It shifts the burden to employees who often work longer than a standard week for no additional pay in exchange for a 'promotion' in terms of title, status, and responsibility," he said. "But it often adds greater work-life conflict and stress particularly when they end up performing tasks of the hourly, non-exempt workforce."

"There is little risk that expanding overtime would stifle real investment in technology, capital, or research and development."

Lonnie Golden, labor economist

Golden said the executive action will prove to be a win for workers, employers, and the overall economy.

"Employers will pay overtime hours and/or add new jobs or additional work hours for existing hourly or part-time employees," he said. "This could be just what the doctor orders for what ails the U.S. labor market, which has featured a stubbornly high rate of underemployment."

Addressing critics, Golden said the new rule will induce a shift of some of the existing high corporate profits to employee compensation, which will spur consumer spending and income security in many middle-income households. He believes there will be few concerns for business.

"So much of current profits are being used for stock buy-backs or are churning in financial markets," he said. "There is little risk that it would stifle real investment in technology, capital, or research and development."

Golden said his personal preference, as an analyst and academic, would be to create a third category of employee between fully exempt and non-exempt, but it isn't possible under current law.

"A new classification would serve to both curb and compensate their additional hours without creating a cliff that might unintentionally deter employers from creating such jobs," he said. "It would take a wholesale reform effort at the legislative level, though. Closing the loopholes first is a wise course of action in the meantime."

Golden is frequently sought out by politicians, businesses, unions, and the media for his expertise on labor studies, the economics of labor markets, overwork, and work-life policies and practices.