WHAT’S the easiest way to boost America's sluggish wage growth? President Barack Obama thinks that expanding overtime pay may be the answer. On June 30th details emerged of a new scheme in which 5m more Americans will be entitled to “overtime pay”—1.5 times their normal pay when they work more than 40 hours. Mr Obama hopes that the plan will boost the paypackets of some workers. The economic evidence behind it says this may not be the only benefit.
American workers have seen better days. Since the recession, inflation-adjusted private-sector hourly earnings have stumbled. People wistfully remember decades long gone, where they were used to annual rises of 2.5% or more in real terms every year. Small wonder, then, that economists are trying policy ideas from the glory days. The Fair Labor Standards Act (FLSA), implemented in 1938, is one place to look. The FLSA stipulated that any worker who worked more than 44 hours and was paid less than $30 a week was entitled to overtime pay. The FLSA is still in force (and the working-hours threshold is now 40 hours) but the earnings threshold was last updated in 1975 and currently stands at...Continue reading
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