Saturday, January 29, 2011

A Presidency in Peril

Robert Kuttner, A Presidency in Peril: The Inside Story of Obama’s Promise, Wall Streets’s Power, and the Struggle to Control our Economic Future, (White River Junction, VT, Chelsea Green Publishing, 2010), 274 pages, $25.00

In his second book on the Obama presidency, Robert Kuttner contrasts what President Obama promised in his campaign with what he is delivering as president. He promised a progressive program of change from his predecessor: George Bush. By 2010, the Obama promises started looking like more of the same.

The book opens with a short declaration: Barak Obama is at risk of being a failed president. Kuttner delves briefly into the Obama personality before going on in journalistic fashion to explain how and where he deserted his campaign promises and stopped doing what he said he would do in his campaign.

Following the introduction, the next five chapters take the reader through the issues and policies of Obama the campaigner compared to Obama the President. First, in the Politics of Capture, Kuttner contrasts the campaign and the campaigners with the group that took over after the election. The careers and experience of those that took control had a record of policies and positions from previous work on Wall Street or in previous administrations. The record left by Robert Rubin, Lawrence Summers, Rahm Emanuel and a few others lets Kuttner differentiate the influence of the new people from the progressive speeches of the campaign.

Chapter two titled Continuity and Collusion sketches the fateful choices and feeble policies toward the mortgage mess, bank failures and the timid recession stimulus plan. The discussion emphasizes the similarities of the Bush policies with the Obama policies. Even though Kuttner evaluates the Bush-Obama policies in historical perspective and makes alternative policy suggestions chapter two and the three chapters that follow become a well documented issue oriented narrative of disappointment in Obama, the President and politician.

When Kuttner narrates the reform efforts of former Federal Reserve chair Paul Volker to restore the Glass-Steagall banking act, Obama voters feel what they voted to change slipping away. When Kuttner recounts the reform efforts of Elisabeth Warren to create a new consumer financial protection agency, and describes the tepid efforts to control financial derivatives, Obama voters feel disappointed as the Obama administration abandons reform for the status quo.

In crony capitalism we meet the insiders from Citi bank and Goldman Sachs and the double standard of negotiations and policies between financial bailouts and the bailout of the auto industry. By now readers realize Kuttner was taking daily notes and doing regular interviews as he followed the path of the Obama administration during its first year. Readers get details of policy discussions between Obama insiders and their differences with dissenters in Congress, the independent agencies and the administration.

Chapter six, titled Political Malpractice, returns to the theme of a presidency in peril. It starts with a reminder that a Republican, Scott Brown, easily beat a Democrat, Martha Coakley, in the Massachusetts special election to fill Senator Kennedy’s senate seat. In a famously democratic state the Republican won by 57 to 37 percent as disgusted voters switched parties. Kuttner cites other polls, commentary and events to reinforce the mood of the voters and their growing refusal to accept the President’s apparent identification with narrow financial interests or his refusal to fight for the changes he supported before the election.

The final chapter begins by comparing Obama in the first year with other Democrats, especially Bill Clinton and Harry Truman. The feisty and blunt talking Truman abandoned private negotiation for public confrontation: highlighting differences between the parties in the process. The Harry Truman review stands out in stark contrast to Obama with his bland explanations of behind the scenes dealing.

Kuttner digresses with fiscal, tax and global economic policy suggestions that deliver more for working people, before returning to Obama the organizer and the need for a social movement. In a section, It takes a Movement, he remembers the “stunning capacity to inspire Americans after decades of dashed hopes and failed politicians,” but then admits Obama the organizer is dead, or transformed into an organization man who wants to be accepted by the group he needs to confront.

It is clearly hard for Kuttner to accept his own words because he takes nearly nine pages to describe the historical trials and tribulations that go with organizing effective social movements and the part presidents might play in them. When he writes “Interacting with a President who has been a source of both great hope and disappointment is a tricky affair,” he expresses the same frustration there was with President Clinton and President Carter. Their label was Democrat but they failed to lead social movements or stand up for working people and Democratic causes.

Kuttner ends with a note of optimism that the economy is weak enough, the Republicans empty enough and President Obama practical enough to bring change for a larger social and national interest. Maybe, but Kuttner does a better job showing that the disappointed are a large enough group to elect a Harry Truman candidate who will think big. Who that might be is a good question. I have to confess that reading A Presidency in Peril makes me doubt it is Barak Obama.

Sunday, January 23, 2011

Michigan Jobs

A Comprehensive Review and Analysis of Michigan Jobs (2,175 words)

The dismal state of the Michigan job market continues to be a topic of news and politics. Michigan jobs trended upward through the 1990’s reaching a monthly average high of 4.68 million establishment jobs in 2000, which turned out to be the beginning of a continuous decline. Note (1) By 2009 monthly average jobs were down to 3.88 million, a drop of 70 thousand jobs from 1990 to 2009, and a drop of 800.1 thousand jobs from 2000 and 2009.

Michigan is the only state with a decline in statewide employment from 1990 to 2009. The decline between 2000 and 2009 is the biggest drop among all 50 states and the District of Columbia and the biggest percentage decline, 17.1 percent. Michigan jobs are still dropping, down 32 thousand for 2010 through October.

Given the reality of Michigan labor markets it is not surprising that candidates for state office in the November election typically discussed plans for new jobs, and sometimes in confident tones. Such a long slide makes it hard to blame one party, or one policy, but either party that holds elected office will want to improve the outlook on jobs. Let’s review their circumstance and weigh their prospects for success.


Michigan had 839 thousand manufacturing jobs in 1990. In the early 1990’s manufacturing jobs dropped briefly below 800 thousand, but ended the decade with a high for manufacturing in Michigan: 898 thousand jobs. By 2009 manufacturing jobs were barely 462 thousand, a loss of 376.6 thousand jobs from 1990 to 2009 and a loss of 435 thousand jobs after 2000.

Even though Michigan suffered heavy manufacturing job losses other states had the same problem. In 1990, Michigan manufacturing employment ranked 10th among the 50 states in percentage of statewide employment with 21.3 percent of statewide jobs. North Carolina ranked first with 26.4 percent of statewide jobs in manufacturing.

Even though North Carolina began to lose manufacturing jobs sooner than Michigan, North Carolina went from 824 thousand manufacturing jobs in 1990 to 447 thousand in 2009. The North Carolina drop of 376.2 thousand jobs is almost identical to the Michigan manufacturing loss of 376.6 thousand in the same years, 1990 to 2009.

North Carolina relied on the Textile industry in similar fashion as Michigan relied on the automobile industry. North Carolina lost 240 thousand textile industry jobs between 1990 and 2009, whereas Michigan lost 208 thousand automobile jobs in the same period. Even though Michigan manufacturing job losses are severe they do not look worse than North Carolina, yet Michigan lost 800.1 thousand statewide jobs from 2000 to 2009 while North Carolina was able to maintain statewide employment in the same period at 3.9 million jobs.

High Productivity Services

Both Michigan and North Carolina need new jobs to replace their lost manufacturing jobs before they can add jobs. That means both states must have faster than average growth in service industry jobs to make up for the decline in manufacturing. Trouble is there are major sectors of the service economy where the jobs don’t grow, or grow too slowly to maintain their share of statewide jobs.

For example, wholesale and retail trade jobs in Michigan declined by 54 thousand from 1990 to a low of 604 thousand in 2009, a loss of 1.1 percent of statewide jobs. Using computer technology in trade, especially for barcodes and inventory management and for Internet sales, increases labor productivity. Retail and wholesale sales volumes per work hour are up and sometimes at rates comparable to productivity in manufacturing.

The expanded use of computers and digital technologies has raised productivity and slowed the growth of jobs in information services like newspapers, broadcasting, phone services and in financial services like banking, lending and insurance as America slowly shift to a paperless economy. The share of these jobs decline as America and Michigan gets more news from the Internet, and electronic banking replaces driving to the bank to exchange paper with a teller.

Health Care, Education and Professional Services

From 1990 to 2009 when Michigan lost 70 thousand jobs, Michigan’s declining sectors lost 475 thousand jobs. The declining sectors guarantee that the difference of 405 thousand jobs shifted to other sectors of the Michigan economy, especially health care, education and professional and technical services.

Health care including social services in the national economy continues to create more jobs month after month where it now has 12.5 percent of America’s establishment jobs. The recent expansion of health care insurance passed by Congress will help the states generate new jobs. Michigan health care has 160 thousand new jobs since 1990 with 13.7 percent of statewide jobs, above the national average and up from 9.4 percent.

Education employment for public and private elementary, secondary and post secondary education continued to grow from 1990 to 2009. Michigan reached a peak of 437 thousand jobs in the years from 2003 to 2005 and then dropped back to 421 thousand in 2009. The share of education in statewide jobs continued to go up reaching 10.9 percent in 2009, even though 2009 education totals are up only 61 thousand jobs since 1990.

Professional and technical services have jobs in law, accounting, architecture, engineering, computer design, management consulting, scientific research, advertising, and veterinary services. Michigan increased professional services jobs between 1990 and 2009 going from 202 thousand to 221 thousand jobs. The 2009 total is 5.7 percent of statewide employment, just equal to the national average in professional services jobs. Michigan needs to expand these services but professional service jobs are down from a high of 276 thousand in 2000 to 221 thousand in 2009.

Low Productivity Services

Health care, education and professional services accounted for 240 thousand of the 405 thousand of the jobs that shifted from declining sectors from 1990 through 2009. The remaining 165 thousand of the 405 thousand replacement jobs shifted into local business support services and leisure and hospitality services, where low productivity helps maintain jobs that pay modest wages.

There were 92 thousand replacement jobs shifted to business support services with jobs in administrative and facilities services, employment services, temporary help services, telemarketing, security, janitorial maintenance, landscaping and a few more. These new jobs are a 2.5 percent increase in the share of Michigan jobs between 1990 and 2009.

An additional shift of Michigan jobs were scattered into leisure and hospitality services such as accommodations, restaurants, performing arts, spectator sports, amusement parks, casinos, golf and country clubs, fitness and recreation centers, selected personal services, and a broad category of non-profit associations that includes foundations, advocacy and civic groups, professional associations and a few more. The total of these replacement jobs come to 73 thousand from 1990 to 2009.

Michigan vs. North Carolina

North Carolina avoided a general decline in statewide employment that plagues Michigan. North Carolina and Michigan had about the same performance in jobs from 1990 to 2000. Differences show up in the period from 2000 to 2009 when North Carolina did better in health care adding 131 thousand jobs and better in education adding 79 thousand jobs. Michigan added only 83 thousand health care jobs and 8 thousand jobs in education. North Carolina did better in professional services adding 31 thousand jobs; Michigan was down 55 thousand professional service jobs in the 2000 to 2009 period.

Otherwise North Carolina maintained itself with local services jobs and by adding 48 thousand jobs in state and local government, excluding education. Michigan had a decline of 14 thousand state and local government jobs excluding education from 2000 to 2009 and much bigger losses in trade, which dropped 141 thousand jobs compared to a loss of only 13 thousand jobs in North Carolina. Even though Michigan has gambling and gambling jobs and North Carolina does not, Michigan lost 19 thousand jobs in leisure and hospitality; North Carolina gained 66 thousand leisure and hospitality jobs.

North Carolina has 448 thousand manufacturing jobs left after losses every single year since 1995; 462 thousand manufacturing jobs remain in Michigan. Both states needs these jobs, but other states want them, the Federal government continues to ignore manufacturing moving abroad and rising labor productivity continues to limit jobs. In the last decade, North Carolina did better than Michigan generating more service jobs buying and selling within their state than Michigan was able to do. In spite of the difference both states have a declining share of manufacturing jobs and a growing share of jobs in local services.

Reality Check

The reality of shifting jobs between service sectors together with the long term decline in manufacturing limits the options for Michigan jobs. As of 2009 35.2 percent of Michigan jobs remain in manufacturing and the service sectors decimated by higher labor productivity and the use of computer technologies. Even though jobs in wholesale and retail trade are restricted from higher labor productivity, the Michigan loss of 141 thousand trade jobs between 2000 and 2009 is especially high. Michigan must do better in trade to have a chance at job growth.

Politicians seldom advocate government jobs as a solution to job needs, but Michigan cannot afford to sit by and let these jobs decline, no matter how unpopular taxes and spending come to be. Government jobs are spread out geographically and help maintain a core of jobs in many communities. If these jobs decline, other jobs will decline with them.

In Michigan and North Carolina, like other states all over the country, jobs are shifting out of high productivity industries and into low productivity industries like leisure and hospitality and personal services. Low productivity is the friend of jobs, but few politicians want to brag about new jobs in leisure and hospitality as waiters, waitresses, maids, cashiers, ushers and ticket takers. Low productivity jobs tend to have low pay and families need two or three of these jobs to pay the bills and survive.

The state legislatures and the governors of Michigan and all states will need to support health care expansion and concentrate on producing as much health care within their respective states as possible if they expect to meet the needs of new jobs. Think of more health care and job growth as the same.

Public education has helped provide new jobs in Michigan for nearly 20 years, which needs to continue if Michigan wants jobs. In the last few years private schools have added jobs while local public school are down more than 40 thousand jobs since just 2004. Private schools and all the state’s colleges have a chance to bring in out of state students and create jobs.

Professional services give a chance to promote services and jobs that brings in spending from outside the state to support jobs with exported services. Health care and education tend to be local services, whereas professional services are increasingly produced and delivered by computer in the global economy. Michigan must expand professional services if it expects to have more jobs.

Combine the 35.2 percent of high productivity sectors where jobs decline with the low productivity sectors where the wages are low, add in government jobs excluding education, and the total comes to 63.3 percent of Michigan jobs. Jobs in health care, education and professional services account for another 30.3 percent of Michigan jobs in 2009, but the percentage has to increase for these jobs to replace the declining sectors. The alternative is more low paid jobs in low productivity services.

Just three other sectors remain with 6.4 percent of Michigan jobs: natural resources, construction, and transportation with public utilities. All are in decline with fewer jobs now than in 1990 and fewer than 2000. Natural resources, which is logging and mining, has 7 thousand jobs left. Construction and transportation and utility jobs are also off from 1990 and 2000. Construction is down from a high of 210 thousand jobs to a monthly average 118 thousand for October of this year.

Michigan politicians make broad promises to create jobs that will be hard to keep. If they concentrate on health care, education, and professional services and bolster the sagging trade sector, then new jobs could generate enough income and spending to boost employment in the supporting sectors. If they review state tax incidence and the financial sector they might be able to make changes that keep more Michigan generated savings and profits in Michigan for reinvestment and job growth. If they revise Michigan labor law, especially overtime rules, they might be able to spread the work to more people and lower the unemployment rate.

Jobs are a long term problem. I deliberately reference 1990 and 2000 to emphasize that point. In our politics the Democrats promise jobs and fail to deliver, the Republicans promise jobs and fail to deliver, and back and forth. They fail because they look for a quickie solution and pursue some other agenda. Michigan could be different. Your job will depend on it.


Note(1) All job and employment number citations are from the Bureau of Labor Statistics, United States Department of Labor, Current Employment Survey. No exceptions.

Wednesday, January 5, 2011

Overtime Rules

The Fair Labor Standards Act includes overtime rules that define overtime pay at wages not less than one and half times regular pay rates after 40 hours of work in a workweek. Any use of overtime means more work for some that could go for more jobs to others. Requiring higher overtime pay for employers gives financial incentive to avoid the added expense of overtime and hire more employees at regular pay, which helps spread available work to more people. The incentives will be more effective if overtime rules apply to all employment. Instead the Fair Labor Standards Act as amended provides exemptions from overtime requirements for broad categories of employees employed in a bona fide executive, administrative, or professional capacity, selected computer employees, outside sales employees, motion picture employees, and other more narrowly defined categories. (1)

Exemptions from overtime rules go back to the 1940’s but changes drafted during the Bush administration and adopted in August 2004 revised Fair Labor Standards Act rules with new language referred to as white collar rules. The new regulations in Title 29 Code of Federal Regulations Part 541 define an employee’s salary and duties to determine exempt work that qualifies for an exemption from overtime pay.

Executive Employees

The general rules for executive employees that qualifies for an overtime pay exemption under white collar rules means an employee “compensated on a salary basis not less than $455 a week, exclusive of board, lodging or other facilities, whose primary duty is the management of the enterprise or a customarily recognized department or subdivision, who customarily and regularly directs the work of at least 2 or more full time employees, who has authority to hire and fire other employees, or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.” (2)

The definition of management and primary duty in the regulations that establishes exempt work incorporates the traditional managerial prerogatives like hiring, firing, paying, promoting and disciplining as primary duties if they are the principal, main, major or most important duties. (3) Nevertheless, executive employees can be exempt from overtime if they have other non-exempt duties because the regulations allow an employer to exempt an employee who does some exempt work and other activities directly and closely related to exempt work.

The phrase ‘directly and closely related’ means tasks that are related to exempt duties and that contributes to or facilitate performance of exempt work. “Thus, ‘directly and closely related’ work may include physical tasks and menial tasks that arise out of exempt duties, and the routine work without which the exempt employee's exempt work cannot be performed properly.” (4)

The 40-hour work week continues to be the standard full time workweek as it has been for more than eighty years, but exempting executive managers from overtime pay converts three managers working 40 hour weeks into two managers working 60 hour weeks. Using overtime rules to turn three jobs into two makes it easier for employers to economize on wage costs, especially in high wage occupations like executive managers. A lower wage cost with exempt overtime hours also assures fewer jobs in exempted occupations like management.

Occupational Employment Survey data reported by the Bureau of Labor Statistics shows managerial jobs in decline from 1999 to 2009. Managerial occupations were 6 percent of America’s jobs in 1999 with employment just over 8 million. By 2009 managerial occupations were down to 6.1 million jobs and 4.7 percent of the total of occupational employment. The job totals in managerial occupations are for establishment employment, meaning they are jobs at firms, non-profit associations or government.

Undoubtedly the decline in managerial jobs resulted from a combination of factors. It is common now for business to issue laptop computers, cell phones, and Blackberry’s to employees, which makes them available to work overtime in the evening, weekends, or the middle of the night. There are few reports business treats these additional hours of work as time and a half for overtime, but using new technology helps reduce jobs in management anyway.

Administrative Employees

Second on the list of overtime exemptions are the general rules for administrative employees. Any employee employed in a bona fide administrative capacity must be “compensated on a salary or fee basis at a rate of not less than $455 per week, exclusive of board, lodging or other facilities, whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers, and whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.” (5)

“In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered. The term ‘matters of significance’ refers to the level of importance or consequence of the work performed. The phrase ‘discretion and independent judgment’ must be applied in the light of all the facts involved in the particular employment situation in which the question arises.” (6)

The regulations include a list of example decisions that an employee might make to satisfy the requirement to exercise discretion and independent judgment and also summary wrap up. “The exercise of discretion and independent judgment implies that the employee has authority to make an independent choice, free from immediate direction or supervision. However, employees can exercise discretion and independent judgment even if their decisions or recommendations are reviewed at a higher level. Thus, the term ‘discretion and independent judgment’ does not require that the decisions made by an employee have a finality that goes with unlimited authority and a complete absence of review.” (7)

Section 541.203 of the regulations explains specific example occupations that generally meet the requirements for the administrative exemption: insurance claims adjusters, employees in the financial services industry, executive assistant or administrative assistant, human resources managers, and purchasing agents. A description of the usual duties and decisions for these occupations provides the nature of decision making that will allow exemption from overtime status. For example, “An executive assistant or administrative assistant to a business owner or senior executive of a large business generally meets the duties requirements for the administrative exemption if such employee, without specific instructions or prescribed procedures, has been delegated authority regarding matters of significance.” (8)

Educational establishments also come under rules for administrative employees. Employees qualify as exempt from overtime at educational establishments when “compensated for services on a salary or fee basis at a rate of not less than $455 per week exclusive of board, lodging or other facilities, or on a salary basis which is at least equal to the entrance salary for teachers in the educational establishment by which employed; and whose primary duty is performing administrative functions directly related to academic instruction or training in an educational establishment or department or subdivision thereof.” (9)

These educational employees are cited as generally meeting the requirements for overtime exemption: superintendent, assistants with educational duties, principals and vice principals, department heads, academic counselors and other employees with similar responsibilities.

Professional Employees

The general rules for professional employees apply to the learned professions, creative professions, teaching, law and medicine. “To qualify for the learned professional exemption, an employee's primary duty must be the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.” (10)

Having an academic degree is cited as prima facie evidence of meeting the requirement of learning customarily acquired by a prolonged course of specialized intellectual instruction. “However, the word ‘customarily’ means that the exemption is also available to employees in such professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction.” (11)

The regulations have a list of example professions and a selection of occupations that meet the requirements for the learned professions exemption. Exemptions apply to professions of law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, and various types of physical, chemical and biological sciences and pharmacy. Some example jobs signal how far employers can push the definition of learned professions. Jobs that generally meet the requirements for exemption are listed in the regulations: certified medical technologists, registered nurses, dental hygienists, physician assistants, chefs, athletic trainers, funeral directors and embalmers.


“To qualify for the creative professional exemption, an employee's primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical or physical work.” (12)

Creative professionals that generally meet the requirements for overtime exemption are listed in the regulations: actors, musicians, composers, conductors, and soloists; painters, cartoonists, essayists, novelists, short-story writers and screen-play writers and journalists.

There are some stipulations for journalists. “Journalists may satisfy the duties requirements for the creative professional exemption if their primary duty is work requiring invention, imagination, originality or talent, as opposed to work which depends primarily on intelligence, diligence and accuracy.” (13)

Teacher exemptions apply to “Any employee with a primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge and who is employed and engaged in this activity as a teacher in an educational establishment by which the employee is employed.” (14)

Teachers at public or private schools who are permanent, conditional, standard, provisional, temporary, emergency, or unlimited, or certified or not certified, or doing extracurricular activities such as coaching athletic teams or acting as moderators or advisors in such areas as drama, speech, debate or journalism have exempt status for overtime. (15)

The exemption for law and medicine applies to “Any employee who is the holder of a valid license or certificate permitting the practice of law or medicine or any of their branches and is actually engaged in the practice thereof; and any employee who is the holder of the requisite academic degree for the general practice of medicine and is engaged in an internship or resident program pursuant to the practice of the profession.” (16)

Three additional exemptions close out the white collar rules. A computer industry exemption applies to any computer employee compensated on a salary or fee basis not less than $455 a week, and to any computer employee compensated on an hourly basis at a rate not less than $27.63 an hour. (17) Exemptions apply to outside sales employees who make sales or obtain orders or contracts for services and customarily and regularly work away from the employer’s place or places of business. (18) An employee in the motion picture producing industry who is compensated at a base rate of at least $695 a week is also exempt. (19)

Hourly pay and the State of Exemptions

Exempt status eliminates the financial incentive to spread work and hire more people.
Salary and fee basis requirements defining the white collar rules in Title 29 Code of Federal Regulations part 541 does not permit exempt status for most hourly paid jobs. There are exceptions but as a practical matter hourly pay will be preferred for some jobs, especially where work fluctuates, or work has intermittent weeks with less than forty hour schedules.

The Current Population Survey reports the number and percentage of wage and salary workers paid at hourly rates. (20) In 2006, hourly rated employees were 76.5 million and 59.7 percent of wage and salary workers. By 2009 the numbers were down to 72.6 million and 58.3 percent. Having 58.3 percent paid hourly rates leaves 41.7 percent paid on a salary, fee or other basis, which comes to 51.9 million jobs.

Since few hourly paid employees are eligible for white collar exemptions the 51.9 million wage and salary workers not on hourly pay gives a number that meets the first criteria for exempt status: pay on a salary or fee basis. Pay by the hour or by salary continues to be the sole discretion of the employer and as my summary of overtime rules suggests, the new language in the regulations allows more discretion to adjust primary duties to meet the duty tests for exemption from overtime pay.

No agency has a count of salary or fee based employees with exempt status, but the 51.9 million total is big enough to include all employment reported for management, business operations, financial administration, and professional occupations reported by the Bureau of Labor Statistics.

A little over 12 million work in managerial occupations, business operations and other financial administration and the broad wording in the regulations give reason to believe they all qualify, or could easily be adjusted to qualify, for exempt status. Since the regulations specifically include 1.4 million executive secretaries and administrative assistant as exempt administrative employees, financial administration occupations like accountant, loan officer and financial analyst could be expected to meet at least one of the requirements for executive, administrative or professional exemptions as well.

The Bureau of Labor Statistics defines seven major groups of occupations as professional employment with 27.5 million jobs in 2009. (21) Education has the most jobs in professions with 8.5 million in teaching or the exempt duties related to teaching. Health care has another 7.2 million practitioners, which includes 15 thousand athletic trainers specifically cited as an exempted occupation.

Given that embalmers and chefs are not defined in the Standard Occupational classifications as professional jobs but specifically included as learned professions in the overtime rules, we can expect the generous definition of learned professions includes more than the 27.5 million jobs.

Millions of business and professional jobs that support middle class and career minded Americans have no legal right to overtime. Truth is these are just the white collar rules; there are many more overtime exemptions in other parts of Title 29 of the Code of Federal Regulations. Airline employees, seasonal and recreational employees and firefighters working in small public fire departments with less than 5 firefighters are three of many more exemptions from overtime pay.

The Fair Labor Standards Act gives Americans the legal right to the minimum wage and overtime pay beyond 40 hours a week. That comes up at the beginning of the Fair Labor Standards as amended and its regulations. By the end of the regulations millions and millions of Americans have no legal right to overtime pay.

The rules that regulate exempt status for overtime pay are in addition to Fair Labor Standards rules for compensable work. (22) Employees are legally entitled to be compensated for hours worked. Exempt status means exemption from overtime pay at time and half, not exemption from pay for time worked.

Compensable time has a definition and a regulation because disputes can arise over compensable time as well as overtime. If an employee is asked to do an errand on the way to work reasonable people might disagree whether errands on the way to work are compensable time. When disputes occur new and amended definitions are drafted, adopted and published as they have been over the years for many different work disputes under the Fair Labor Standards Act. However, employers are still expected to pay wages and salary for compensable time worked up to and over forty hours if that occurs. Employers cannot legally expect employees to work for free or to work free overtime hours.

Still we have to expect free overtime hours happen anyway. In education, for example, phrasing in teacher contracts makes no allowance for over time: “Teacher shall perform such duties as deemed necessary, shall attend all assigned meetings, shall be present at school during school hours, shall be present at school or other location outside school hours as directed in connection with school events or activities.”

Teacher work days fill up with student contact hours, emails and calls from parents and assigned meetings that leave little time for grading or preparation. Grading and preparation occur in the evenings and weekends. Millions of America’s public school teachers work beyond 40 hours a week, but I am unaware they receive additional compensation for overtime hours. Their overtime appears to be free work; a donation or part of their dedication.

In office based occupations pressure to get the job done and be part of the team make it easy to ignore some extra hours. Salaried employees are not typically encouraged to clock their overtime hours and those who do might be reluctant to request additional pay. Just like unpaid interns, salaried employees may choose not to complain about free overtime as bad for career advancement. Legal rules mean nothing when employees choose to go along or feel good at being dedicated, even without pay.

Economizing on wage costs is a universal practice. Even though laptop computers and overtime rules help save labor costs and reduce jobs there is a difference between them. The former is applied technology; the latter applied politics. When the Bush administration expanded overtime exemptions by writing new overtime rules, they made it easier to economize on wage cost by eliminating the financial incentive to restrict overtime and spread work to more people. Exemption from overtime pay for millions of jobs and free overtime for others helps to build America’s surplus of labor.


(1) Title 29 Code of Federal Regulations, part 541, available at

(2) 29 CFR part 541.100

(3) 29 CFR part 541.102

(4) 29 CFR part 541.703

(5) 29 CFR part 541.200

(6) 29 CFR part 541.202

(7) 29 CFR part 541.202

(8) 29 CFR part 541.203

(9) 29 CFR part 541.204

(10) 29 CFR part 541.301

(11) 29 CFR part 541.301

(12) 29 CFR part 541.302

(13) 29 CFR part 541.302

(14) 29 CFR part 541.303-541.304

(15) 29 CFR part 541.303

(16) 29 CFR part 541.304

(17) 29 CFR part 541.400

(18) 29 CFR part 541.500

(19) 29 CFR part 541.709

(20) Bureau of Labor Statistics, U.S. Department of Labor, Characteristics of Minimum Wage Jobs

(21) Data here are from Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment Survey, May 2010.

(22) Title 29 Code of Federal Regulations part 785