Thursday, 13 March 2014

Australia and the USA: different directions on penalty rates

While I am waiting for bankers, stock brokers and other financial wizards to embrace the seven day week, I note that in the United States they are moving in a different direction to us when it comes to penalty rates. President Barack Obama is pushing to extend penalty rates to more workers while here Eric Abetz wants to narrow their scope.
An editorial in this morning’s New York Times explains the new Obama approach:
For the first 40 years of its existence, a worker’s right to time-and-a-half for overtime, established by federal law in 1938, operated as intended. It guarded against exploitation and inequality by ensuring that extra hours meant extra pay.
Since the mid-1970s, however, that right has been severely eroded. The law gives the Labor Department the authority to update the salary threshold and job descriptions that define who is eligible for overtime pay. The last meaningful update was in 1975, when the Ford administration raised the salary threshold significantly to account for inflation.
In 2004, rule changes by the Bush administration, which remain in force today, basically locked in the law’s by-then outdated and inadequate salary threshold, while giving employers more leeway to define workers in ways that make them ineligible for overtime pay.
President Obama’s directive to the Labor Department to revamp the nation’s overtime rules is an opportunity to undo the damage. By reasserting a meaningful right to overtime, it could lift pay for an estimated five million workers a week and, in the process, help to mitigate the wage stagnation and income inequality that increasingly plague the American economy.
The most important change the department can make is to raise the salary threshold — the pay level below which all hourly and salaried workers are guaranteed overtime pay. Today’s threshold, $455 a week, is unacceptably low, barely above the poverty level for a family of four. The Labor Department should set the new threshold at around $1,000 a week, which is where it would be if it simply had been adjusted for inflation since 1975.
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