Gov. Wolf’s Overtime Rule Will Backfire

Gov. Wolf’s progressive policy agenda is threatening to make it more difficult to hire and retain workers.

Earlier this year, the governor proposed increasing the overtime salary threshold from $23,660 to $47,892 over a four-year period. What does this mean? Companies must pay anyone earning below the threshold an overtime rate if they work more than 40 hours a week. The Obama Administration proposed a similar rule in 2015, only to have it struck down by a federal court.

For some, this proposal sounds reasonable because it puts more money in the pockets of workers—in theory. In practice, overtime regulations can harm the very people they're supposed to help. James Sherk, formerly with The Heritage Foundation, provides an illustrative example:

A court decision in Japan extended overtime rates to “name only” managers at McDonald’s restaurants who do work similar to that of hourly employees. McDonald’s complied with the ruling, but reduced pay by an offsetting amount. Similarly, IBM recently reclassified 7,000 salaried and technical-support workers as eligible for overtime as part of a lawsuit settlement. It also cut their base pay by 15 percent, leaving their total earnings unaffected. Extending overtime to more salaried employees will have little effect on either their hours or earnings.

A similar scenario may play out in Pennsylvania.

Additionally, the proposal’s one-size-fits all standard will hammer small and medium-sized businesses with compliance costs, potentially forcing some to close. Robert Bee, vice president and general manager of WBRE-TV and the public affairs division chair of the Greater Wilkes-Barre Chamber of Commerce Board, put it succinctly: “If the business can’t survive, then the workers get hurt more…No one wants to hurt workers, but no one wants to hurt businesses.

This example of government overreach is why lawmakers should embrace regulatory reform. A great place to start is with Senate Bill 561 and House Bill 1237, sponsored by Sen. DiSanto and Rep. Keefer, respectively. The proposals would require approval of any significant economic regulation imposing a cost of more than $1 million on the commonwealth, local governments, or the private sector. This would prevent any governor from unilaterally burdening business and workers with counterproductive regulations.

These and other regulatory reform measures would limit the size and scope of government, leading to more jobs, higher wages, and a better standard of living for Pennsylvanians.