It is reported that President Obama will sign an executive order making more workers employees eligible for overtime compensation. The President will do this by raising the salary threshold for exempt workers. Currently, under federal law the salary minimum is a paltry $455 per week, or $23,660 annually. In contrast, California has adopted a rule of two times minimum wage. Since minimum wage is currently $8 per hour, the salary minimum is $33,280 ($16 x 2080 hours). In July California’s minimum wage bumps up to $9 per hour, putting the salary threshold at $37,440 ($18 x 2080 hours).
“He’s buying votes in an election year,” howl the President’s critics. And that is probably true. President Obama is always a politician. Moreover, President Obama is doing this via executive order. Critics assail the President’s actions to bypass Congress using his “pen and phone” strategy to get done what he wants regardless of the legislative branch of government.
What effect will the raise in the salary threshold have on business? I’m not sure. Hopefully, supervisors are making more money than the people they supervise, even without overtime compensation. If they are not, perhaps their salaries should be increased. But the increase in minimum wage, the increase in the salary test, as well as the many new taxes levied on businesses, will continue to drain the system.
Society has never taxed its way into prosperity. Nor do societies develop meaningful economic prosperity by way of wealth distribution.