A blog about business and economics.

June 30 2015 6:28 PM

One Industry That Will Hate Obama’s New Overtime Rules: The Media

Today the Obama administration officially proposed new regulations that it says will entitle at least 4.6 million additional Americans to overtime pay. On the whole, it seems like a reasonable move that may encourage businesses to hire more workers rather than milk employees for all the uncompensated labor they can get away with.

But, man, let me tell you—this is going to make life difficult for your favorite magazines and websites.


Under the rule change, most salaried employees who earn less the $50,440 per year will automatically be eligible for time-and-a-half pay when they work more than 40 hours in a week. Currently, the cutoff is just $23,660, after which workers can be exempt from overtime requirements if they're considered management or a professional.

Why the need for such a big jump? Labor activists and progressives argue that today's overtime threshold lends itself to all sorts of abuses by employers, who find tricky ways to categorize low-salary workers as supervisors in order to get out of paying them for all their hours. This happens, partly, because the rules about who counts as a manager are murky at best. At a big box store, for instance, somebody might be called a supervisor if she spends a part of each day coordinating her colleagues' schedules, even though she spends the vast majority of her time behind a cash register or stocking shelves.

“Because you have these regulations that are so fuzzy, we basically have this whole group of people who are faux-managers and faux-supervisors," Judy Conti, the National Employment Law Project's federal advocacy coordinator, told me. "They have to work for $30,000 a year, and 60 hours a week, and they end up making less per hour than the people they purportedly supervise, because they have to work all of these hours uncompensated.”

Raising the bar on exemptions to $50,440 should eliminate that problem by ensuring that low-pay workers who don't have much on-the-job bargaining power qualify for overtime no matter what creative job description their employer concocts for them. (Hourly workers, typically, are overtime-eligible no matter what they make.) It also brings the threshold exactly back to where it would have been had the government adjusted it for inflation every year since 1975, when it covered 65 percent of salaried employees, as opposed to the mere 11 percent who fall under it today. The sorts of jobs affected include a lot of typically lower-middle-class occupations in retail, fast-food, and customer service, as well as white-collar office workers like some insurance agents and paralegals.1

How exactly the rule change will affect those workers is a bit unclear, though there are reasons to think it'll be a net benefit. Of course, businesses could simply choose to pay their employees more. But more likely, they'll find other ways to adjust. For starters, they might lower base pay for some jobs that they expect to involve more overtime. They might also choose to hire more workers and ask them to work fewer hours. The National Retail Federation, which leans extremely conservative on labor issues, warns that “while the total number of workers employed by these industries would likely grow, the quality of these jobs would diminish: they would be low-paying and often part-time, and many workers currently in lower-level professional and managerial jobs would find their status jeopardized.” Those concerns seem a bit exaggerated, however. Equally likely, many part-time employees who want more hours may get bumped up to full time while their underpaid, overworked "bosses" get some time off.

That said, there will be trade-offs. There is probably at least one aspiring restaurant manager at your local Chipotle who would be happy to pull a slightly longer shift without extra pay for the sake of a promotion. The Department of Labor's proposal will make that a lot harder to do.

Then there are the creative industries, which are singularly ill-suited to deal with these rules. I'm going to use journalism as an example here, because I know it. But you could sub in other businesses at will.

As you're probably aware, large swaths of the publishing world run on the energy of ambitious, educated, and badly underpaid young people, who are willing—and often content—to work long hours for the sake of being read, and potentially noticed by editors elsewhere who will one day hire them for more money. There are a few problems with subjecting those eager twentysomethings to overtime rules.

First, the government isn't necessarily protecting them from exploitation. While journalism and other creative fields have been guilty of some indefensible labor practices—hello, unpaid internships— advancing in them requires building a body of work over time that will impress future employers. Sometimes that requires a bit more than 40 hours a week of effort.

Writers are also idiosyncratic. Some spend hours neurotically finessing their articles. Some happily knock out eight posts in a day. That makes it hard to guess how long any one job should require in media—it depends too much on the person filling it. And if you can't quite predict how long your next staffer will need to do their work, you can't really lower their base pay in order to account for the overtime you'll theoretically have to shell out because someone decided to spend a few late nights crafting the great American think piece. As an alternative, publications could issue a blanket rule against working more than 40 hours, but then, the Internet would probably have about two-thirds the news you enjoy today, and the meager profits we earn by tricking you into glancing at ads would dwindle further. As for hiring more bodies, again, budgets are a bit tight.

Finally, it's sometimes really, really hard to define what counts as work in this business. When I'm reading the Upshot or the Wall Street Journal in the afternoon, am I just zoning out, or am I keeping abreast of the competition? It's tough to say. What about the hours I spend tweeting? Am I goofing off, or am I promoting my personal brand? Probably a bit of both, but labor law doesn't countenance those sorts of ambiguities.

To be sure, there are some news organizations that do pay overtime. But for a lot of the industry, it would be an untenable norm. And the overarching point here is that, while overtime functions pretty well when it's used to discourage companies from working vulnerable employees in low-skill positions to the bone, it's not necessarily appropriate in creative industries where educated young people are out to make a name for themselves and margins are thin.

That's one reason why the Department of Labor already offers an overtime exemption for creative professionals (interestingly, it doesn't cover journalists in all circumstances, but let's not digress). But it looks like under the Department of Labor's new rule, it won't be applicable to anybody earning under $50,440. My guess is that this will result in two things: First, lots of publications will simply ignore the overtime rules, partly with the implicit consent of their employees. Second, there will probably be some lawsuits by people who decide, ex post facto, that they were forced to work extended hours without being properly compensated.

One solution might be to keep overtime rules looser for creative types. But there's a chance that might open up loopholes that would help companies cheat other workers out of their overtime. “I am sure there are some industries that are going to be more challenged by this than others," Conti told me. “At the same time, the law was put in place so that people can’t work abusively long hours for abusively low pay.”

Even if some of us might want to.

1In case you're wondering, doctors, lawyers, and educators are also exempt from overtime rules, meaning medical residents, public defenders, and your kid's third-grade teacher aren't suddenly going to be earning extra pay.

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June 30 2015 12:15 PM

Nobody Has Any Idea What’s Going On With Greece Right Now

As of Monday, it seemed as if the Greek crisis was finally hurtling toward a conclusion, or at least a meaningful inflection point. With its bailout deal expiring and negotiations for an extension logjammed, the government in Athens had called a national referendum for July 5 on whether it should accept the austerity plan its European lenders had demanded in return for a new rescue package. A "yes" vote, and Greece would get another round of loans to pay its existing debts but would be doomed to keep slogging through the depression that has left unemployment above 25 percent. A "no" vote, and European leaders insist Greece would be forced to leave the eurozone, with potentially calamitous consequences, at least in the near term.

Today, that choice is a bit less clear-cut. According to Bloomberg, German Finance Minister Wolfgang Schäuble has told lawmakers behind closed doors that "Greece would stay in the euro for the time being" even if its people vote "no" in the referendum. Should that come to pass, he added, Greece "may be able tap about 32 billion euros ($36 billion) in European Union support funding to boost its economy."


Given that Germany is by far the most important of Greece's creditors, Schäuble's reported comments strongly suggest that this weekend's vote might not resolve anything. Even if Greeks say no to Europe's last offer, negotiations could continue. And the fact that this information is leaking probably makes it a bit more likely that the Greek people will in fact vote "no."

Theoretically, there is still at least one hard deadline lying ahead for Greece. On July 20, the country owes the European Central Bank 3.5 billion euro. If it misses that payment, the ECB could be forced to cut off the emergency lending that has kept Greece's banks from imploding, a move that would almost certainly set a Grexit in motion. Then again, if there is yet another pot of money available to Greece as Schäuble seems to be hinting, it’s not altogether clear that date means anything, either.

"But wait!" you may be thinking. "Didn't I just read on that Greece is already about to default on its debts." Well, yes, some of them. It looks like the country will miss a $1.7 billion payment to the International Monetary Fund. But while that means Greece likely won't be able to receive further loans from the group, it doesn't have much bearing on its ability to stay in the euro. So, talks continue on. 

In short, nobody has any damn idea what's going on with Greece.

June 26 2015 5:10 PM

Disney Theme Parks Bring the Tyranny, Danger of Selfie Sticks to an End

In a win for selfie stick–fearing tourists everywhere, Disney said Friday that it is banning the device from its theme parks. Lately, the gadgets had “become a growing safety concern for both our guests and cast,” a Disney spokeswoman explained to CNN Money. Disney had already banned selfie sticks on rides but was reportedly still struggling with rogue park-goers who would sneak their devices on board and then whip them out, sometimes causing the ride to grind to a halt.

The ban is scheduled to take effect at Disney’s U.S. theme parks on Tuesday, and to be implemented at Disneyland Paris and Hong Kong on July 1. Going forward, visitors attempting to bring selfie sticks into a Disney park will be asked to check them at the main entrance. Behave yourselves, people!


Does this spell the final doom for our cultural obsession with snapshots, with selfies, with moments? Disney isn’t the first to ask patrons to lower their selfie sticks. The Smithsonian and the Metropolitan Museum of Art imposed similar bans earlier this year. Who knows what other institutions might be next? In the meantime, we’ll file this one away as another victory for consumer safety. Between that and the recall of Lululemon’s face-attacking draw strings, it’s been a big week.

June 26 2015 12:11 PM

Brands Are Draping Their Logos in Rainbows to Celebrate Marriage Equality

On Friday, the Supreme Court brought marriage equality to all 50 states, ruling that same-sex marriage bans violate the 14th Amendment. People across the country are celebrating, and so are brands:

Even Twitter changed its avatar. Rainbows are way in.

June 25 2015 7:59 PM

There’s Yet Another Major Lawsuit That Some People Think Could Threaten Obamacare

Thanks to today's 6–3 Supreme Court decision, Obamacare's crucial insurance subsidies have been saved, and King v. Burwell has been laid to rest. But hope springs eternal for conservatives who would like to litigate the president's signature legislative achievement into oblivion. And right now, believe it or not, there is yet another case revving up that at least some people think could pose a dire threat to the health care reform law.

On the other hand, it might also just be futile exercise in Republican wishful thinking. So let's discuss.


Last November, the GOP-led House of Representatives filed a lawsuit arguing that the Obama administration had overstepped its executive authority by spending money without Congress' permission to implement a little-known but important piece of the Affordable Care Act known as "cost-sharing reductions." The rules are designed to make insurance more affordable to lower-income Americans who buy coverage on public exchanges; insurance companies have to limit out-of-pocket costs like co-pays and deductibles. In return, the federal government pays a subsidy directly to the insurers in order to cover their expenses. If this sounds like a slightly roundabout and confusing system to you, well, at least it's simpler than cutting every working-class family a check each time they visit the doctor.

The problem, according to the House lawsuit, is that while the entire cost-sharing reduction program is part of the Affordable Care Act, Congress never got around to appropriating any dollars for the subsidy payments. So, how has the administration been reimbursing insurers? It pulled funds from another, permanent pool of money designed to cover tax credits, such as the insurance subsidies that were at issue in King v. Burwell. Secretary of Health and Human Services Sylvia Mathews Burwell says this was meant “to improve the efficiency in the administration of subsidy payments.” The House Republicans say it was just a workaround designed to flout the will of Congress. "The Executive Branch has no authority to expend public funds that have not been [properly] appropriated," the suit notes.

At first blush, this case doesn't look especially great for the administration. For instance, the White House asked for money to fund cost-sharing subsidies in its 2013 budget. When Congress shrugged in response, Health and Human Services found money in the tax-credit account. All of this might suggest that officials knew they needed an appropriation, then conveniently ignored that fact.

Now here's why some people are convinced this case could completely mangle Obamacare. The cost-sharing reduction subsidies are quite large—the House suit says they could total $178 billion over 10 years. But even if the administration had to stop paying them because of a loss in court, insurers would still be required by law to offer many Americans a break on their out-of-pocket costs. That would be expensive and likely force premiums up. As premiums go up, more people would likely leave the insurance markets and you could, theoretically, get something like the death spiral King v. Burwell could have caused had the Supreme Court ruled the other way.

"Were the House to succeed in this claim, the consequences would be nearly as devastating as those that could follow from King v. Burwell," Washington and Lee University law professor Timothy Jost wrote recently. Chris Jacobs, policy director at Bobby Jindal's America Next, agrees, though he's a bit happier about it. "If King v. Burwell ... represents an existential threat to Obamacare," he wrote last year at the Wall Street Journal, "the implications of the Boehner lawsuit come a close second."

But maybe it doesn't. There are several reasons this lawsuit could amount to a lot of noise, and not much else. First, it's not clear yet that the House actually has the legal standing to sue the administration. It needs to show that, somehow, its own members were harmed by the administration's decision to pay out the subsidies. And while you could say that ignoring the dictates of Congress damages the institution, typically, the courts don't relish the idea of refereeing political disputes between the other two branches of government. If the House loses on that score, the suit is done.

But even if they win the right to argue their case, the House Republicans' argument might be a lot more feeble than it looks, as David Super, a Georgetown University law professor, explained to me. By passing the Affordable Care Act and instructing the administration to pay insurers their subsidies, Super said, Congress effectively appropriated the funds to do it. "The Supreme Court has been very clear that you do not have to have a law that says 'appropriations' across the top. You just need a law directing that the money be spent," he said.

But there are even deeper reasons the case might not in fact be a very effective weapon against Obamacare. If the administration did lose at court, insurers would still be entitled to their subsidy payments under the law. Therefore, they could simply file their own suit against the federal government at the Court of Federal Claims and collect the money owed to them.

“Even if one imagines this case winning, which I have great difficulty imagining, the result would be that the insurers would have to take a few extra steps to get reimbursed, not that the money would not flow," Super said. "In cases like that, the courts have generally been pragmatic, and not required the filing of a lawsuit that everybody knows would win.”

So, I asked, what were the chances of one day seeing the House case at the Supreme Court?

“Because so little is at stake, it’s hard to imagine it getting to the Supreme Court. But even if the court took a very strange view and ruled in favor of it, it’s hard to see it as an existential threat to the law, because the money would still be provided.”

Perhaps conservatives will have to find another source of hope.

June 25 2015 6:07 PM

Lululemon Is Recalling 318,000 Items With Face-Attacking Draw Strings

Two years after the Great See Through Yoga Pants Scandal of 2013, it looked like Lululemon was finally in the clear. The man who said some women’s bodies “just don’t actually work” for spandex resigned from the board. Profits were up. Men’s sales were soaring. Investors were happy. But alas, it may have been too much to hope for. Another Lululemon clothing disaster is under way.

Lululemon is recalling 318,000 women’s tops in the United States and Canada that the U.S. Consumer Product Safety Commission reports led to “seven injuries to the face and eye.” How did these injuries occur? The offending items—more than 20 styles altogether—were manufactured with “an elastic draw cord with hard metal or plastic tips in the hood or around the neck area.” Because of this, when the drawstrings were “pulled or caught on something and released,” they could “snap back, impact the face area and result in injury,” the commission explains.


How severe were these injuries? It’s unclear. When I called the CPSC late Thursday afternoon, the case officer for Lululemon’s recall had left for the day. It’s similarly unclear over what period the seven reported injuries occurred, though a CPSC spokeswoman pointed out that the relevant merchandise was sold from January 2008 through December 2014. Lululemon, for its part, says in a statement that there were “no serious injuries reported” and no lawsuits filed.

While potentially hazardous hoodie drawstrings aren’t to be taken lightly, it does seem worth noting that the available information from the CPSC suggests an average of one injury was reported for each year the items were available. That’s ... not a lot.

Anyway, should you own one of these women’s clothing items, the CPSC recommends you stop wearing it and “either remove the draw cord or contact Lululemon to request a new, nonelastic draw cord with written instructions on how to replace the draw cord.” You can find a full list of the affected merchandise online. Until then, dress with care. You never know where the next athletic apparel attack could spring from.

June 25 2015 5:16 PM

Obama’s College Accessibility Plan Won’t Rank Colleges Anymore. That Basically Defeats the Point.

When President Obama proposed a federal ratings-based college evaluation system two years ago, it was the centerpiece of an ambitious plan to reform federal higher-education policy. The idea behind the evaluation system was to rank colleges based on accessibility, affordability, and the success of their students so that federal aid could be allocated for students at colleges offering the best education and value. This would encourage institutions to keep costs down while also empowering students to make smart choices for college. But some experts and academics denounced the idea, worrying the system would create a “shame list” for colleges and pressure them to lower their standards or purposely turn away certain students in order to score high in the rankings.

The Obama administration is now scrapping the ratings system, the U.S. Department of Education announced Thursday. In place of the former plan, later this summer it will release a collection of “tools” to “provide students with more data than ever before to compare college costs and outcomes.” The department promises a consumer-oriented website that will give comprehensive information about the country’s exhaustive offerings at the college level. In other words, the government is releasing a college-rating system—without the ratings.


This backpedaling was almost certainly triggered by criticisms that the plan has incurred over the past two years. According to the blog post announcing the change, in making its decision the department took into serious account the “feedback” it received about the impracticality of distilling many important elements of education into quantitative metrics. (Given college associations’ vehement, very public opposition to the plan, “feedback” is diplomatic.)

While some university administrators and academics may greet the death of the ratings component with a sigh of relief, this isn’t actually cause for celebration. Because now, the system—which sought both to lend a helping hand to students and to hold colleges accountable—is essentially worthless.

At the time of the original plan’s announcement, administration officials excitedly described the proposed system as a “datapalooza” that would push colleges to become more affordable and benefit students in a myriad of ways. Now, without a ratings component of the evaluations system, colleges lose that incentive to do better than their peers. There’s little reason for a school to spend time and effort making improvements according to the government’s metrics if no one is going to award it a shiny new reputation for its efforts. In addition, federal education tools are already unpopular and underutilized, so a time-intensive, data-heavy website without a clear ranking system seems unlikely to attract many new users—especially when up against well-known resources like U.S. News and World Report’s annual rankings.

A ratingless system puts the burden of making smart college choices on students and parents alone—many of whom might not know how to make sense of metrics like retention rates and loan default records. Rankings would have given these students and parents an easy way to compare schools’ performances and value without having to do intensive research. Now, they must waste time wading through tons of data to find good options—a luxury that may elude lower-income families, exactly the group of people the new system is meant to help.

And even if families dedicate hours each day to perusing the government’s new site, there’s no guarantee they will make the best decisions simply because the data is available. “I’m all for releasing data that helps students make better decisions, but it puts a lot of onus on students. More consumer info will not suddenly create perfect markets,” tweeted Rachel Fishman, a senior policy analyst at the New America Foundation. Without ratings, the remnant of Obama’s new college evaluation system could simply wind up a big, confusing mess—that is, if people pay any attention to it at all.

June 25 2015 12:19 PM

Obamacare Is Still Alive, Still Pretty Awesome, Even in States That Hate It

"This law is working, and it's going to keep doing it," President Obama said this morning during his press conference celebrating the Supreme Court's decision to spare the Affordable Care Act from partial annihilation. As much as Republicans might protest otherwise, the comment was pretty much a straightforward factual statement, at least if you judge health reform against its primary goal of reducing the uninsured rate.  

One of the amazing bits about Obamacare is just how well it seems to be succeeding in parts of the country that have rejected its core pieces. Remember that the last time the court passed judgment on the ACA, it ruled that states had the right to turn down its Medicaid expansion. Since then, 21 states have abstained from the giant wad of federal cash being offered to them in order to cover more of their low-income population. And yet, the uninsured rate is still down by about one-third in the opt-out states, as shown in this chart from the Urban Institute that Paul Krugman has been linking to. That's not quite as dramatic as the nearly 50 percent drop seen in states that embraced the Medicaid expansion, but it's impressive nonetheless.


As Krugman has noted, some conservatives will try to argue that the improving economy is responsible for expanding health coverage. And I guess you could argue it's purely a coincidence that the uninsured rate started rapidly dropping around late 2013, right when Obamacare's main provisions started going into effect. And maybe, if you do enough mental somersaulting, I could sort of see how it makes sense that our incomplete, slow-moving jobs recovery would bring us a historically low uninsured population. But the much more simple answer is that a law designed to help people get insurance is in fact helping people get insurace—even in states that have tried their best to sabotage it.

June 25 2015 11:45 AM

Here Is the Huge Health Care Disaster We Just Averted

Obamacare just won a big victory from the Supreme Court. Again. On Thursday, the court ruled 6–3 to uphold the federal subsidies established by the Affordable Care Act. In his opinion, Chief Justice John Roberts explains that “the combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner.” Wait, you say! What exactly is the death spiral? What is this worst-case scenario that we just averted? Above, Slate explains.

June 25 2015 11:19 AM

“Pure Applesauce” and “Jiggery-Pokery”: Linguistic Highlights From Scalia’s Obamacare Dissent

Justice Antonin Scalia may have been on the losing side in this morning's big health care decision, but as usual, he definitely won the day's contest to see who could pack the most hilarious and anachronistic zingers into a dissent. On Twitter, Matthew Lauer has plucked some of the best one-liners. What was the majority opinion? "Pure applesauce" and "jiggery-pokery." Also, "words no longer have meaning." We expect nothing less from the man who brought us "argle-bargle."