No Overtime for the Supervisor of Sandwiches

COLD OPEN

KATHRYN: If you’re listening, you can’t tell that I’m wearing sunglasses, but I do feel like it’s altering my persona to be wearing sunglasses inside at 3:00 PM. It’s like cool Kathryn is the host today. Like, not economist Kathryn Anne Edwards, just, like, your girl Kathryn talking, chill.

KATHRYN: Hello, and welcome to Optimist Economy. I’m economist Kathryn Anne Edwards.

ROBIN: I’m Editor Robin Rauzi.

KATHRYN: On this show, we believe the U.S. economy can be better, and we talk about how to get there one problem and solution at a time.

ROBIN: This week on Anonymous Economy, we’re both wearing sunglasses.

KATHRYN: I have some type of eye thing going on. A blood vessel popped in my eye, and I look like — this is a deep cut, but for you Star Trek fans — I look like Data when he’s, like, half-Borg, half-Data, where one of my eyes is blue and the other one is red. And just for, like, a little modicum of privacy, I am wearing sunglasses, and Robin is wearing them in solidarity.

ROBIN: But I’m going to have to take them off, because I can’t read anything.

KATHRYN: This is going to be a real off-the-cuff episode, because I can’t read any of my notes.

ROBIN: I know. We should’ve done this, like, as a garden party episode outside.

KATHRYN: But I’m about 85% sure, based on reading my notes, that we are talking about overtime.

ROBIN: We’re talking about overtime, why we have it, who gets it, who doesn’t get it, and what to make of the no tax on overtime provision that was part of the OBRA.

KATHRYN: Oh, bah.

ANNOUNCEMENTS

ROBIN: I don’t think I have any announcements except, you know, we always appreciate it when you give us money. You can do that at optimisteconomy.com.

KATHRYN: Truly, when you give us money, we give it to Andy and Sofi for production. And so we cannot thank you enough for every donation you give us.

KATHRYN: In a couple weeks, we’ll be recording our Q&A episode, so send your questions about the economy to optimist.economy@gmail.com.

ROBIN: Someone’s testifying in front of Congress. We can say it here — that I will be testifying in front of Congress. If you’re listening the day the episode dropped, potentially tomorrow.

KATHRYN: The Optimists, you don’t know this about me, but I’ve actually testified in front of Congress before.

ROBIN: Uh-huh.

KATHRYN: Bombshell, but I have, and I’m doing it again.

ROBIN: Mm-hmm.

KATHRYN: If this is the day that I’m testifying, I will not be wearing sunglasses inside.

RETCON

ROBIN: Retcon.

KATHRYN: I have one retcon, which is that my executive order that making employees pay for parking is a form of wage theft was met with a Spotify review: “The parking executive order means Kathryn has moved back to Houston from D.C. fully and spiritually.”

ROBIN: So true. Yeah, when you start demanding free parking, that’s like — that’s Texas all over, isn’t it?

KATHRYN: Honestly, I feel seen. I got a lot of pushback for that one. But I maintain that if you make employees pay to park, you’re sapping their wages.

ROBIN: I had just one thing for Retcon. You know, we went through a lot of economic data that had been reported in that episode, and I’m just curious: how confident are you feeling about this data and its accuracy at this moment in time?

KATHRYN: Well, okay, is it a capturing question or a reliability question? So the capturing question would be like, “Do you think we’re actually seeing everything in the economy measured through this data,” or is it a “this data is being manipulated or eroding and it’s not good anymore?”

ROBIN: I guess my question was the latter, but the former is a really also important point.

KATHRYN: The data is as good as it was, which is extremely good, but could be a lot better if we invested in the statistical agencies in the U.S. So we have very good data. And one of the things that makes it good is that we know what’s wrong with it. The strength of our data reporting really comes from the depth of transparency in what we get right and what we get wrong. And I think that’s what makes it trustworthy for me — if they make a mistake, if they miss something, they will tell you.

ROBIN: I feel that about news outlets too. The ones that you trust the most are the ones that actually make the most corrections.

KATHRYN: Yes, because they’re like, “Yep, we missed that one. We did this one.” I mean, I guess that’s a shout-out to us. That’s kind of why we do retcon, is to say we might have said something that we were wrong about.

ROBIN: Shout-out to us. We also make mistakes. We’re pretty self-assured in our personalities.

KATHRYN: So I think the data is facing generational problems. People aren’t responding to surveys as much. There’s a lot of administrative sources for data that we could integrate that we’re not doing because the agencies don’t have the money to do so. There are problems with the data, but we know what they are.

ROBIN: Yeah. We could do better. We just have to invest in doing it better.

KATHRYN: Now, is it capturing the extent of pain in the economy? I think the answer is going to be no for anyone experiencing pain, right? Like, if you don’t have a job, you don’t experience unemployment at 4%. Your unemployment is 100%. I think that’s a real tension in economic reporting in the data that is not special to right now. I mean, we talked about it when the unemployment rate was invented, and the measurement finalized, when GDP was invented and finalized, that these measures aren’t perfect. And when the economy is weak and causing pain, I think that’s when our dissatisfaction with measures gets the highest.

ROBIN: Yeah. Okay.

TERMS & CONDITIONS

ROBIN: Terms and Conditions. What did you look up?

KATHRYN: I looked up — and believe it or not, even though you weren’t there, I once again said something like a malapropism. I said it wrong, and I had, like, a spiritual Robin there to say, “Did you just say ‘tender hooks’?” And I was like, “Yeah, I’m on tender hooks.” They’re like, “No, it’s ‘tenterhooks’ with a T.” Well, that’s mortifying. So then I had to go look up what it means to be on tenterhooks, and tenterhooks has to do with the textile industry where the tenter was a wooden frame that you would stretch the cloth over, and then the hooks kept it in place. So it just means to be a piece of cloth pulled taut. And so if you’re on tenterhooks, it means you’re nervous about something, which — I was like, “Oh, ‘tender hooks,’ like it’s fragile.” But I feel like tenterhooks means you’re just stretched so thin, you know, there’s no slack.

ROBIN: It’s a state of suspense or agitation, as opposed to the actual physical tenterhooks that are keeping you as tight and as stretched as possible. I thought I’d work that in for the overtime episode when we’re all so stretched, but it’s not quite the right meaning. It’s specifically that you’re in a state of suspense about the uncertainty of a future event.

KATHRYN: So I looked up tenterhooks.

ROBIN: So I looked up “perquisite,” which I did not know is the origin of the word “perk,” like perks on your job. Perk became sort of an abbreviation for perquisite in the mid-1800s, and it’s, you know, a thing that’s regarded as a special right or privilege — often as a result of one’s position in society, but also one’s job or employment. I don’t know why we don’t spell it with a Q. That would be much better, right?

KATHRYN: Oh, a perk with a Q? All right, some indie pop artist is going to release an album called Perk with a Q in all caps now that we’ve said that.

ROBIN: Actually, eventually, once we start giving out things to subscribers, we’ll call them perqs.

KATHRYN: Amazing. Robin, you with the words every time.

ROBIN: Okay, that’s it for the front of the show. We’ll be back in just a second for the Big Pilcrow about overtime.

BIG PILCROW

ROBIN: Here we are. We’re back for the Big Pilcrow on overtime. So overtime has been in the news a lot lately because it was tax filing season, and this year people got to deduct part of the pay that they got for overtime. This was sort of the — what did you call it? — the little sibling to the no tax on tips was no tax on overtime. I don’t know if it was the little sibling, because it turns out a lot of people took this deduction, way more people than anybody thought they were going to.

KATHRYN: Yeah.

ROBIN: So we thought we’d talk a little bit about overtime, why we have it, who gets it, who doesn’t, and how it’s sort of evolved into what we’ve got going on today.

KATHRYN: I think we can keep this under four hours.

ROBIN: All right. Excellent.

KATHRYN: Good luck in post, Sofi.

KATHRYN: Okay. So overtime. The concept of overtime is that you get paid more than your hourly rate after you work past the standard workweek. So you work 40 hours a week and you make $20 an hour — for the 41st hour, you get paid $30 an hour because you get a bonus for having to work over the standard hours. It is meant to penalize employers working people too long so that they hire more people instead of overusing the workforce they have.

ROBIN: I mean, it’s hard to overstate how overworked the workforce was before we had this rule. I was reading about steelworkers in particular who would work 12-hour shifts, and they would alternate eventually from daytime shifts to nighttime shifts. And so when they made the change from one to the other, they would just work 24 hours. The notion of working 24 hours in a steel mill is totally crazy. It was routine that people would work 12-hour days and then a half day on Saturday. 70 to 80 hours a week was not uncommon at all for anybody working at the time.

KATHRYN: You would hire people into your workforce and you would work them to the bone. And it was Samuel Gompers of the AFL who became really one of the first major champions of a limited workday — an eight-hour workday. And even in the 1880s, they wanted an eight-hour workday. And if you watch “The Gilded Age,” this came up because Train Daddy — the main husband, I don’t remember any of their names — at one point is trying to suppress a strike. And, like, I guess the audience is supposed to sympathize with him because at one point he doesn’t have the police fire on striking workers, and that makes him a good person. I don’t know, that show has really weird sympathies for the rich. However, what they are chanting is, “Eight, eight, eight. Eight hours of sleep, eight hours of work, eight hours for what you like,” and that came out of Gompers and the labor movement of the 1800s.

ROBIN: I read that it even came back to the post-Civil War era with Ira Steward publishing the eight-hour movement. People would come out of working for the war effort and were just burned out.

KATHRYN: Yeah. Gompers didn’t invent it. My understanding is that he incorporated it into the labor movement, that part of labor contracts weren’t just for pay but had to be for a limited workday, and it starts to get popular through the industrialized era as more people are subjected to just abysmal work schedules.

ROBIN: Yeah. But it isn’t until really the Depression, right? And it doesn’t become implemented until it seems like we’re trying to spread jobs around — rather than trying to work a bunch of people 16 hours a day, you should have twice as many people work eight hours a day.

KATHRYN: So the Fair Labor Standards Act of 1938 is a federal law. It prohibits and regulates child labor, it sets a minimum wage, and it sets overtime provisions. It standardizes the workweek at 44 hours, and then it phases into 40. That act was for all workers, not just women and children. And in the 40 years before that, labor organizers and the unions would focus on men, and legislation was just about regulating women and children, because women and children were seen as unorganizable in the labor sense.

ROBIN: Oh.

KATHRYN: Yeah, and in fact, there are these really detailed histories about how the Fair Labor Standards Act was deeply opposed by some of the largest labor leaders at the time, because they did not want the government to give you labor rights. They wanted to earn labor rights for their members. The official union labor movement has a very interesting relationship with the Fair Labor Standards Act, because it is the first federal law to regulate labor, and it does not exclude men. It is for all workers, not just women and children. We think of that as natural, but it was a big turning point. So before that, the wage and hour provisions that had been won from unions were for their members, and then this made it an actual federal floor for all workers covered by the legislation.

ROBIN: Yeah, though not everybody was covered by the legislation, right?

KATHRYN: No. When the Fair Labor Standards Act was introduced, it was really watered down from what people wanted in terms of the minimum wage, in terms of the length of the workweek, and in terms of which industries were covered. And it expanded over time. So 1938 starts at this nugget of: we have made a federal law that regulates wages and hours of workers, not by gender or age, in certain industries. And then for the next 40 years, it just continues to expand to get better minimum wages, cover more workers, cover more industries. But the Fair Labor Standards Act is both a high-water and low-water mark in terms of the protection of workers. But it institutes overtime, which says that if you work more than the standard workweek, you have to pay time and a half.

ROBIN: And — I think because I live in California, where we have a law that sets the limit at eight hours a day — but this is a week, right? It’s 40 hours a week. So you could do 10 hours for four days a week and not get overtime. I also read that Project 2025 was like, “Well, we should just make that over a month instead of a week.”

KATHRYN: Jesus. Well, the alternative would have been an actual prohibition. In order to regulate the workweek, you are not allowed to employ people past 40 hours. So instead you can employ people past 40 hours with a penalty, and the penalty is meant to encourage you to keep the workweek at 40 hours so that you’ll have to hire more people and have standard shifts.

ROBIN: This was a massive win, and it was both preceded by a drop in the workday associated with the Great Depression, preceded by a drop in the workday that unions had negotiated for their own members, and then followed by an absolute transformation of what it meant to be, say, a production worker in the U.S. in terms of how many hours you worked.

ROBIN: Okay, so this is 1938. We get the FLSA, and it creates this sort of penalty for overworking people, but it does open a backdoor, right? Which is this exemption.

KATHRYN: And that becomes the whole story to me about overtime. Yes. In the 1938 legislation, there was a phrase — they use the word “bona fide” — in Section 13(a)(1), that the minimum wage and overtime provisions do not apply to bona fide executives, administrators, and professionals.

ROBIN: So this is broadly thought of as the white-collar worker exemption, right?

KATHRYN: Actually, they had no idea what it meant at the time. I mean, you can read about this from the Congressional Research Service — the first guy who’s in charge of coming up with what “bona fide executive, administrative, and professional” means. It’s like, “Uhhh, what?” So they go through these — these are the EAP, executive, administrative, professional, the EAP exemptions. So everybody is subject to a 40-hour workweek and everyone is subject to overtime, unless you are an EAP. So they have to define what EAP means.

ROBIN: We’re still fighting about this, right?

KATHRYN: Still fighting on it. So I’m going to try to give you a condensed history of EAP. This is the exception to overtime. The law passes in ‘38. It’s going to go into effect. There’s a guy whose job it becomes to define EAP, and he says, “An executive is someone whose primary job is management. We’re going to say administrator and executive are basically the same thing, and then a professional is someone who has intellectual and varied work.”

KATHRYN: So that’s their kind of first EAP, and over the course of the next 15 years — keep in mind there’s a war in between when no one really cares about this — in the years afterwards, they try to come up with what executive, administrative, and professional means. And we arrive at what starts as a two-part test and ends up as a three-part test. In order to be exempted, first part: you have to be a salaried worker. Second part: you have to make a minimum amount of money that would put you into the EAP class. And your duties have to be basically of either the management or intellectual-and-varied type. So you have to be paid a certain way, paid a certain amount, and do certain things, and only in those circumstances can you get out of minimum wage and overtime.

ROBIN: I remember when I first got my first job, I was like, “I don’t understand what this means” — being “non-exempt” just seemed like the biggest double negative.

KATHRYN: So probably almost everyone listening is exempt. You are exempt from the minimum wage and overtime provisions of the Fair Labor Standards Act because you’re a white-collar employee, like it or not. So through the ‘40s, ‘50s, ‘60s, and ‘70s, every time they try to update this definition, everybody loses their shit. Workers lose their shit, employers lose their shit. Everybody is mad about this definition all of the time, but Congress and the Department of Labor are trying to come up with a test of what does it mean to be exempt from the Fair Labor Standards Act.

ROBIN: Are you exempt from everything in the Fair Labor Standards Act, or just overtime?

KATHRYN: Overtime and minimum wage.

KATHRYN: So in ‘75, they’re like, “All right, we have to do this again. We’re going to come up with an interim measure, an interim rule, and then we’re going to go back and revisit it.” And right after that, inflation spikes, and within the Carter administration, there’s a fight about whether or not we should raise the overtime exemption limit or if that will put inflationary pressure into the economy, so they put it on hold. They don’t get to address it in the second term because they lose and Reagan becomes president. Over the course of the Reagan administration, any attempt to raise the overtime exemption is thwarted and put on hold. Same thing with Clinton. He says he’s going to touch it. He never does. It’s not until 2004 that the interim overtime exemption salary level is addressed.

KATHRYN: And over the course of that 30-year period, it goes from around two-thirds of salaried workers in the U.S. being subject to overtime down to around 8% of workers failing the test and getting overtime.

ROBIN: And when we say “get overtime,” that doesn’t even mean they actually get it. It just means that if they work more than 40 hours a week, they would have to be paid overtime.

KATHRYN: Yes. It is really — I think it’s hard to convey just how revolutionarily bad this was in our economy, because as white-collar work is growing, service work is growing, people are moving out of the factories, they’re moving into retail and service and management and professional business administration — all of that grows essentially outside of the umbrella of FLSA protection as opposed to underneath it.

ROBIN: What’s pretty amazing too is that in 2004, that salary threshold was $23,660. So if you made $23,661, you were no longer able to get overtime if your employer didn’t want to pay you that. And that number stayed frozen for 16 years.

KATHRYN: The number was frozen between 1975 and 2004, and then in 2004 they raised it to $23,660. Sorry, I can’t read my notes because of the sunglasses. But it was frozen in nominal terms for 30 years. And when they moved it up, it was still below the poverty line.

ROBIN: Yeah.

KATHRYN: Credit to the Bush administration — at least they raised it. The only Democratic president in that time period had eight years to do so and did not. So it’s not just that the standard was left to erode, it was that growth occurred outside of it. And so now, culturally, two generations later, most American workers have no idea that even on a salary, you should be subject to overtime, and it should be rare for you to work more than 40 hours in a week. It should not be normal that you work 45 or 50 hours, or that you come in on Saturday or Sunday, or you answer your email all the time. There is a version of the world where that’s not normal, and that’s not the one we have, in part because this policy was not addressed.

KATHRYN: But to take it back to our timeline: 2004, the Bush administration raises it, and it goes from around $8,000 to around $23,000. When Obama becomes president, he champions this policy, and the Obama administration champions it, and the Biden administration does as well. Federal rulemaking takes a long time, but they wanted to update the federal rules without having to have Congress update the legislation, and they did, and it went through the rulemaking process. By the end of the Biden administration, they get the standard up to the equivalent of $35,568 — a.k.a. $684 a week. That’s what it is in 2019.

KATHRYN: Biden sets into place a two-year increase that will, by 2026, raise it to around $60,000. So it’s going to go from $35,000 to $60,000. Anyone who makes less than $60,000 a year in the U.S. is going to get overtime, which means you’re going to have radical changes in how these people are employed in terms of how many hours they have to work. About a week after Trump wins re-election in 2024, a federal judge says that it’s not allowed, and the new Trump administration is basically not fighting the appeal. So this was a massive victory — I mean, talk about snatched.

ROBIN: Yes and no, because this has happened before. This is what happened during the Obama administration, where they tried to raise it to almost $48,000. And I think it was the same court — maybe the same judge — a guy in East Texas who says — but he goes back to this three-part rule, right? And says, “Well, you can’t just change the salary level, because now you’re ignoring the duties and job role piece of how we calculate who’s going to get overtime.”

KATHRYN: I worked for a lefty labor think tank in 2008, and they were absolute champions of this. Like, they believed very strongly in this. And I remember when I got my employment contract, it included overtime. I made over the overtime provision of $23,000, but they felt that, like, I was a research assistant, so I should have been classified as a non-exempt employee, and that’s how I was paid. I was paid hourly.

KATHRYN: And I remember the first time I got overtime, I was like, “Yo, this is awesome. This is straight up awesome.” But I was 22, working in D.C., and I had easily the best job out of everyone I knew, because all of these 22- to 25-year-old junior staffers working at think tanks, working at research firms, working at consulting firms, they all worked horrible hours. And I would be like, “Well, happy hour for lefty labor leaders starts at 5:01, and y’all can join me when you’re done.” I’m so lucky I had this job. In my first full-time job with a salary, I would log my hours in and out every day, and on Friday afternoon, the woman who ran HR would say, “You need to clock out by 3:00.”

ROBIN: Oh, because you’d already —

KATHRYN: Because I’d already worked 40 hours. And I remember I told my boss that I hadn’t finished what they had given me, and she just said, “Kathryn, if you can’t finish the tasks that are assigned to you, either we haven’t told you how to do them correctly or we haven’t given you the appropriate amount of time. And if you can’t do the job, that’s management’s fault, not your fault.” And I was like, “Oh.”

ROBIN: Whoa.

KATHRYN: But I think it was just like — this is a basic dignity. You are 22, you’re an idiot, you have no idea what you’re doing. We gave you a task your first month on the job. If you can’t finish it in time, we haven’t given you the support or we’re managing our people incorrectly. I’m gifted in life that I am now 20 years deep into thinking that that is the rule and not the exception.

ROBIN: Not a gift most people got, yeah.

KATHRYN: Not a gift that most people got. And imagine how your work life would be different if the expectation was: I work 40 hours, and if I don’t, it’s because my manager’s doing a bad job and not because I’m not doing a good job.

ROBIN: So we wind up in this situation where the salary test is really the one doing all of the heavy lifting. And so when the salary threshold goes up, then what happens? Isn’t that essentially what this paper studied?

KATHRYN: Yeah, so this is one of my favorite papers to have come out in economics in the last 10 years. So from 1975 to 2004, the salary cap to get overtime erodes. In 2004, the Bush administration increases the salary exemption, and it goes from around $8,000 to around $23,000. Does this actually make a difference? Did people actually get overtime? Well, that’s not what they found.

KATHRYN: What the 2004 cap created was a bunch of people who used to be not eligible to get overtime, and now they were. So what their employers did was basically decide that they were all managers, so they still wouldn’t have to pay them overtime. So instead of being a store assistant, I become a store manager, and I don’t get overtime. And they did this systematically. And this paper looks at the systematic managerial titling of workers in our economy in order to avoid overtime.

KATHRYN: The most egregious example came from the Family Dollar store. It gave a very large share of its employees the title of store manager, and their job would be, like, sweeping.

ROBIN: Yeah. And they were working like 60 to 90 hours a week, and only doing like five hours of anything that could even remotely be constituted a management activity.

KATHRYN: Yeah, so they lost their court case. Family Dollar lost, and they had to pay $35 million in unpaid overtime to 1,500 employees. That’s a lot of money.

ROBIN: Or was that just how much money —

KATHRYN: No, that was pay. $35 million to 1,500 people —

ROBIN: Oh my God.

KATHRYN: Family Dollar was not alone in this. All kinds of companies started to inflate the titles of their basically hourly shift workers in order to keep them from getting overtime. Let me give you some of the titles, because this is the best part. My favorite is director of first impressions.

ROBIN: Oh, my favorite is director of first impressions.

KATHRYN: So if you work at a place like a Petco and your job is to wash the dogs, are you a groomer or are you a grooming manager? You work at a food cart in a large office building, and you become the food expectations manager. These are absolutely ridiculous titles.

ROBIN: A reservations clerk was the lead reservationist.

KATHRYN: Oh, the lead reservationist. But, like, a hostess at a restaurant would be the director of first impressions. A Walmart greeter would be a manager of consumer expectations.

ROBIN: Yeah, these are crazy.

KATHRYN: These are ridiculous, but this is what employers did to avoid having their employees be subject to overtime so that they could still work them for more hours. This is gross. The idea that someone would be making $20,000 a year and they would be a director of first impressions, so you could work them 50 or 60 or 90 hours a week without penalty — that’s gross. We do have a law to prevent it, and it has fallen into disuse.

ROBIN: I don’t think I realized that unpaid overtime wages are like 80% of the wage theft FLSA cases.

KATHRYN: Yeah. Overtime is everything when it comes to labor standards, because if I can pay someone $20,000 a year and not be charged when I work them 60 hours a week instead of 40, I am getting 20 hours of free labor off of that person. So there’s wage theft, like the actual wage theft where people are not paid overtime and they’re subject to it, and then there’s the wage theft of: we should be making overtime if I work 41 hours in a week, and every hour after 40 they are stealing money from me.

ROBIN: Totally. Like, they’re stealing your full hourly every hour beyond that. It reminds me of — what’s that movie?

KATHRYN: Office Space.

ROBIN: Office Space. Yeah. “I’m gonna need you to come in on Saturday.” The idea that you’re salaried and therefore you’re at the whim of your bosses to come in and work additional hours on Saturday.

KATHRYN: Yeah. That’s free labor. They couldn’t ask you to work on a Saturday. They couldn’t ask you to stay late, and every hour past 40 is labor that they’re getting from you for free because they’re avoiding labor regulation.

KATHRYN: Yeah. I think we finally got to the point that I wanted to make, which was one of the reasons why Americans don’t earn that much money is because they give a lot of it away for free.

ROBIN: And they don’t know that they’re giving it away for free.

KATHRYN: Let’s see, what year is it? It’s been 50 years since we have had robust overtime enforcement for white-collar workers. I heard someone once refer to this as the middle class’s minimum wage. The protection you need is for time at work, to make sure they’re not sapping more from you. Because if I make $50,000 a year and work 40 hours a week, that’s a very different job than if I make $50,000 a year and work 60 hours a week. My relative hourly pay is a lot lower on a salary the more hours I work.

KATHRYN: And so — I don’t know. I think on some issues I can be really centrist and be like, “I’m a capitalist. I love capitalism. We can do this.” On other issues I’m almost leaning towards Republican on certain things. But on this one, I’m like, “I am to the left of Vladimir Lenin. Everybody needs overtime. The workweek is 40 hours. This is ridiculous.”

KATHRYN: On this show, we like to talk about one problem and solution at a time. This one’s both. It’s right there in front of us. We want to have normal work lives. And we have the legislative power to do so, and we’ve had successive administrations who have tried to get this protection for workers. But it’s so behind the scenes. It’s been two generations. We have gotten so divorced from this mindset of: it doesn’t matter if I work in an office, I still deserve — my time is my time, and they’re stealing it.

ROBIN: We keep saying overtime, but really this is about limiting the workweek. How many hours are you allowed to work? We have one mechanism for enforcing it. It’s overtime. We’ve let that mechanism fly. You work all the damn time.

KATHRYN: You don’t have limitations on your workweek anymore.

ROBIN: The other interesting part of that study was that they also looked at where this title inflation was most common, right? And it really was linked to essentially enforcement — places like the Dollar Store that were nationwide, they pushed to see what they could get away with most in states where they knew that the Wage and Hour Division or the Bureau of Labor in that state wasn’t going to do anything about it.

KATHRYN: Yeah. Some states have lax labor enforcement, some states have super strict labor enforcement, and they knew exactly what to do. They pushed the envelope in the places where they thought they could get away with it. And I think the key part of that study was they only did that for jobs that fell just over the salary cap. So if the salary cap is $22,000, you would see the bump to director of first impressions came from people who made $23,000, not $21,000. It was absolutely a tool to get over the cap and to get around having to pay overtime and limit the workweek.

KATHRYN: And what I thought was really interesting is that they took the time to note: those employees didn’t have better careers. It wasn’t as if actually becoming a director of first impressions was putting you on a career track to succeed at that company. It was just a way to get around the workweek limit.

ROBIN: And in fact, I think they found that it cost them higher turnover — but they don’t care, right? Because they may save 13% on compensation, but they lose 4 or 5% in turnover. They still come out ahead.

KATHRYN: Yeah. I mean, who cares if people quit all the time if you can underpay them? As long as underpayment is cheaper than turnover, why would I care?

KATHRYN: So you could say, “This doesn’t apply to me. I’m not a low-wage worker. I’m not at a Family Dollar. This isn’t me. Like, I work in an office.” Maybe this really complicated three-part test — white-collar, salaried, with the income limit and the duties test — you’re like, “Look, I don’t get it. It doesn’t apply to me.” I’ll put it to you this way.

KATHRYN: Pretend that in 1975, the federal government eradicated the overtime provision and said, “If you are a white-collar worker, you are not subject to overtime” — and that’s it. It was just a firm decision: we’re not going to have overtime for white-collar workers. Do you think American workers will have a longer or shorter workweek in 2026? The answer is obviously we’re going to work more.

KATHRYN: They didn’t make it so clear. Instead, they have a three-part test that’s kind of complicated, and one part needs to be addressed, and they make it into an interim ruling, and they decide to get back to it later, but they don’t get back to it later. The way that it happened is complicated, but the effect is the same. White-collar work used to be subject to overtime, and now it is not, and you work a lot of hours. And if you had overtime, you wouldn’t work as many hours. That’s it. That’s the end of the story.

ROBIN: Yeah. Could we talk just for a second about the no tax on overtime situation? What a mess.

KATHRYN: So in theory, you could say, “Oh, no tax on overtime — that’s helping workers who get overtime. That’s helping the working class.”

ROBIN: Okay, first of all, most people aren’t getting overtime.

KATHRYN: Most people aren’t getting overtime. That’s number one. What it did was it allowed workers, when they filed their federal income taxes, to deduct from their income the bonus portion of overtime paid if it came from FLSA enforcement.

ROBIN: So in other words, let’s say you make $20 an hour, but this week you worked 10 hours of overtime at $30 an hour. You could only really deduct the bonus $10 — you earned $300 extra, but you would only deduct $100.

KATHRYN: So I hate this rule because it’s basically subsidizing the use of overtime, which defeats the whole damn point. We want overtime to be incredibly expensive — punitive for overworking workers, right? You work someone 60 hours a week, you’re an asshole. We’re going to soak you so you don’t work people this long. It is not fair to do this, so we are going to set up this penalty so that you don’t work people past 40 hours a week, and we have a standard 40-hour workweek. What this tax deduction for overtime is doing is subsidizing the penalty to reduce it.

ROBIN: It’s this crazy backwards incentive.

KATHRYN: You’re incentivizing employees too, because you’re trying to tell employees, “Oh, like, we’ll make it more worth your while by having this big deduction as a way to stretch the workweek.”

ROBIN: No, you’re incentivizing employers.

KATHRYN: Yeah, but you incentivize employees too. So it winds up being this kind of collusion where it’s like: we’ll hire fewer workers, but you’ll get to take home more of your paycheck now.

ROBIN: It’s just bonkers. It’s 180 degrees from the idea of penalizing companies for overworking their employees — now we’re going to subsidize it.

KATHRYN: This is like the crowning achievement of eroding the success of having a 40-hour workweek — a tax deduction for overtime on your income filing. It’s not going to go to most low-wage workers. It’s just going to encourage people to blow past the 40-hour workweek.

ROBIN: Yeah. And that doesn’t even get into the mess of no employers being ready to report this to the IRS. The rules about reporting these deductions have been unclear, and so far it seems like 20% of filers took this deduction because there’s basically no way to check it. It’s almost twice as much as anybody anticipated. It’s going to be like $50 billion a year that we’re going to give away in this deduction.

KATHRYN: This is basically taking two employees who make the same amount of money, but one of them makes it working 40 hours a week, and the other one makes it by stretching their income over the overtime provisions, and the government is like, “You know which one’s better? We’re going to give the tax bonus to the person who works longer than 40 hours a week.” You’re putting your thumb on the scale for: we want to encourage people who are working longer, as opposed to having normal workweeks. This is putting the weight of the federal tax system on the side of working longer.

ROBIN: Oh God. The more I read about this, the more crazy-making it was. At the time I remember reading about the no tax on overtime and no tax on tips, I was like, “This is just a political sop,” and I was frustrated with that. But when I really thought about what it was incentivizing, I thought, “This is really disgusting.”

KATHRYN: Sometimes I think it’s helpful to think about it in olden times. Like, Andrew Carnegie has a monopoly on steel, and he works people 80 hours a week in a steel mill, and he convinces the federal government to help his steelworkers with taxes for the 70 to 80th hours worked for the week. You would be like, “Yo, man, you are gross. Build libraries. Give your money away. You’re an awful person.” But instead it’s like, “Oh, let’s use the tax system to, like, collude with people who overwork their employees.” No, the whole point was so that we get to have fucking lives and not work all the time.

ROBIN: Yeah.

KATHRYN: I think it’s because of my amazing first employer that I feel so strongly about this. But I also think this is something that could affect you that you probably don’t realize — that this could be a difference maker in your life. So much of public policy, so much of economic policy is really thinking about people at the bottom. And so I think you get programmed to think that there’s very little the government could do to help you in a relatively cushy white-collar job that has health insurance and retirement, that would make your life easier. Oh, no. Give me like six months, sister. I promise you the federal government could do a lot to make your life better, and it starts with labor laws that are so radical they’re from 1938. Like, how fucking radical can it be as a law if it’s from 1938?

ROBIN: Yeah. Well, given what this judge in East Texas keeps doing — saying you can’t just raise the salary threshold, you have to do something about the duties test — we could fix the duties test, right? With an update to the legislation?

KATHRYN: Or Congress just amends the FLSA —

ROBIN: Exactly. It’s not like it’s a constitutional amendment. It’s just a law.

KATHRYN: No, it’s just a law. So right now, all of the changes in this test are coming from administrative rulemaking from the Department of Labor that, at various points, this one judge keeps striking down as beyond the scope of what you’re allowed to do given the legislation. Given the legislation is the key part. Congress meets, they pass a new Fair Labor Standards Act amendment. It increases the minimum wage to $15 an hour, and then it says, “And oh, by the by” — Section 13(a)(1), which says who are the people exempt from the minimum wage and overtime — they could set it at whatever they wanted.

ROBIN: This doesn’t seem like a really hard fix.

KATHRYN: I know people who want to use this same philosophy to mandate that Americans get 10 days of vacation every year, because that will also increase employment — you’re just taking a bite out of the total hours, and they have to hire more people.

ROBIN: Just a kind of similar question: how much is an employer allowed to sap?

KATHRYN: Let’s just put that down on paper. But there are still a bunch of conservative neoliberal economists who would tell you that I would break the economy if I got my way, because I would make people not work 50 hours and they’d have to work just 40.

ROBIN: Yeah. I do think that the other thing that’s skewed this is that people don’t want to hire more workers, often because of healthcare and things that they do provide, right? So they would rather pay the overtime than add another person getting benefits. So many things are so screwed up because of benefits.

KATHRYN: So many things are so screwed up because of benefits. I will say — when the Fair Labor Standards Act was, I think it was either being passed or being debated, FDR had this quote that I have always really loved: “Do not let any calamity-howling executive with an income of $1,000 a day tell you that a wage of $11 a week is going to have a disastrous effect on all industry.”

ROBIN: Yeah. Seriously.

KATHRYN: Yeah, I would love to hear a man who has enough personal wealth that he built himself a rocket to go into space for fun, and then later sent his fiancée there because she also wanted to have fun and made it into, like, a girls’ trip, tell me that his business model will break if no one in his corporate office is allowed to work more than 40 hours a week. Like, oh, bet on it. I bet we still have an economy. Cheers to putting CEOs in a hot air balloon instead of rockets. Calamity-howling executive. What a great phrase.

ROBIN: He’s not even, like, my top five favorite presidents, but the man had a way with words.

ROBIN: All right. We’ll take a break, and we’ll be right back with Executive Orders and Spiritual Sponsors.

EXECUTIVE ORDERS

KATHRYN: Okay, so mine is in theme with the show. Similar to the one where I think you should have a billboard above every business that uses child labor and gets busted — I think that every worker should get to wear a badge when they enter their 41st hour of work for the week. So once you go past 40, it’s either like a sash or like a crown or some kind of name tag of, like, “I’m past 40.”

ROBIN: Special hat.

KATHRYN: Yeah. But I mean, like, can you imagine if you’re in an emergency room and there’s two doctors, and one’s like, “I’m on my 67th hour of work for the past three days.” It’s like, “Oh, no, no, no, no, no — the other one.” But yeah, I think there should be some kind of public signaling mechanism of, like, I’m working more than 40 hours, so people can see how goddamn ridiculous it is that we are broadly expected to work 50-hour weeks.

ROBIN: Yeah. My executive order is more petty, which is: I believe that some percentage of new cars, when they make them, have to be in a color that’s not just on the black-to-white spectrum. You know, the idea that you’ve rolled out a car in five colors, but those colors are all black, white, silver, gray, onyx, storm cloud. God forbid you want a car that’s not monochrome.

KATHRYN: I endorse this. We need more colorful cars.

ROBIN: Yes, more colorful cars. Okay. Spiritual Sponsors?

SPIRITUAL SPONSORS

KATHRYN: My spiritual sponsor for today’s episode is fucking awesome first bosses, because my whole work life is better because I had good first bosses.

ROBIN: Nice. My spiritual sponsor, staying in the vehicular, is my e-bike. I have a Faraday e-bike. It’s 10 years old. It is still running. I just got new brakes on it. I live on top of a fairly steep hill, and it’s like being a superhero going up the hill on that e-bike. It is honestly probably one of my favorite belongings, that bike. And these sunglasses.

KATHRYN: All right. Thank you for putting your sunglasses back on for the end.

The Optimist Economy Podcast is edited by Sofi LaLonde. Video production for social media is by Andy Robinson. Video clips from the show are on TikTok, Instagram, Facebook, YouTube, and LinkedIn, and you can buy T-shirts, hats, and tote bags on our website, optimisteconomy.com.

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