Federal Labor Agencies’ Actions Threatens Worker Opportunity

During the course of the Obama administration, federal labor agencies have turned labor and employment policy on its head via a slew of regulations, sub-regulatory action and decisions. Many of the governmental actions coming out of the Department of Labor (DOL) and National Labor Relations Board (NLRB) are framed as combating income inequality or helping the middle class.

A new report from Georgetown University Center on Education and the Workforce, however, finds that post-Great Recession:

Workers with a Bachelor’s degree have added 8.4 million jobs in the recovery, but workers with high school diplomas or less added only 80,000 jobs after losing 5.6 million jobs in the recession.

While the DOL and NLRB – the primary regulators of the workplace – purport to help low-skilled and middle class workers through their regulatory actions, their policies have not been effective.

For example, the DOL recently increased the salary threshold when an employee is eligible for overtime from $23,660 to $47,476. Labor Secretary Thomas Perez crowed that overtime pay regulation could add as much as $1.3 billion to the pay of approximately 5 million workers in just the first year. Even if workers got the raise Perez predicts from the overtime rule, though it would only average out to a couple of hundred dollars per worker.

Unfortunately, the rule will probably hurt more workers than it helps. Employers likely will respond to the overtime rule by cutting base pay, hiring more part-time and hourly workers, limit workers’ hour to forty a week, and reduce benefits. Another option significantly harms current salaried employees on a management track. Many salaried employees will have their status downgraded to hourly, which will have a negative impact on their long-term career prospects and earnings. The high salary threshold also makes it more difficult for future hourly workers to make the leap to salaried status.

It is important to think about the above stated data about workers with high school diploma or less and their difficulties in finding work.

Many companies, like supermarket chain Wegmans, promote from within (66 percent of jobs are filled from through internal promotions). This means that an employee with only a high school education may start off as an hourly worker performing the tasks of cashier or helper in the seafood department, but after working hard and showing some promise, they may receive a promotion to assistant manager.

Upon becoming an assistant manager, that employee starts gaining better-than-routine skills, receives a change of pay from hourly to salary, gains new benefits, and is on a better career path. In exchange, the employer may expect that employee to work more than 40 hours a week. Both the employer and employee accept that exchange and are better off.

But now, under the new overtime rule, an employer may choose not to promote an hourly worker to a salaried assistant manager position. Instead of paying a salary to get the job done, an employer has to pay overtime for every hour over 40 for workers that earn less than $47,476, as many low-level managers do. The employer may view that as a bad deal and keep the employee with only a high school education in the hourly job. Ultimately, the overtime rule may end up acting as a governmental roadblock on ambitious hourly workers.

Another way federal labor regulators are making it harder for high school educated workers to succeed is with the NLRB’s new joint employer standard. In a recent decision, the NLRB overturned longstanding precedent on when a “joint employer” relationship existed, i.e., when one employer becomes legally liable for another employer’s workers.

For around 30 years, an employer had to exert direct and immediate control on another workforce to establish a joint employer relationship. Now an employer that only indirectly impacts another company’s work terms and conditions may be subject to joint employer liability.

So how does this relate to the lower skilled workers?

The NLRB’s new joint employer standard will increase liability and collective bargaining obligations on companies that use temporary staffing agencies, for instance. Many employers use temporary staffing agencies for non-core functions like secretarial work and during peak business times of year.

With the increased joint employer liability, an employer may not want to risk contracting with a temp agency and become responsible for workers that they do not directly manage. This is where workers are harmed.

As shown in the Georgetown report, during the great recession, many high school educated workers lost their employment and have had a tough time jumping back into the workforce. For an individual that has been out of the workforce for a time, their skills may have eroded or do not apply to needed experience in the fields where employment is available.

Temporary staffing agencies fill this void. Staffing agencies provide a re-entry opportunity for many workers. Placement by a temp firm at a company provides on the job training, which gives the individual marketable skills and a better opportunity to land full-time employment. 

During the course of a year, temp staffing firms employ 16 million temp and contract workers. Better yet, 35 percent of these temp staffers are offered a permanent job by a company where they were on assignment.

These are just a couple of examples how the DOL and NLRB are making it more difficult for workers, especially those without college education, to enter to the workforce.  It is time for Congress to intervene. The Labor appropriations bill is around the corner and many of the initiatives implemented by federal agencies should be defunded. Rolling back burdensome regulation would be a good start toward giving workers better job opportunity.