Pod Insights Optimist Economy No Overtime for the Supervisor of Sandwiches About this episode It wasn’t just hourly factory jobs that were supposed to come with a 40-hour workweek. Even salaried jobs were supposed to get overtime pay, though very few do do anymore. Overtime protections are the only legal mechanism enforcing work-hour limits, and for 50 years, the salary threshold that determines who qualifies to receive overtime has been left to erode. Employers found another workaround too: just call the sandwich maker a "sandwich manager." Now, the new no-tax-on-overtime deduction isn't protecting workers — it's rewarding the kind of overwork it was overtime was originally designed to punish. Fixing the law governing overtime would be a huge and instant boost not just to the U. S. economy, but to our work-life balance.
Chapters:
00:01:43 Announcements
00:02:32 Retcon: Economic data reliability
00:05:54 Terms & Conditions: Tenterhooks; Perquisite
00:08:23 Big Pilcrow: Overtime
00:45:27 Executive Orders: Badge of shame for working past 40 hours; more colorful cars
00:46:52 Spiritual Sponsors: Awesome first bosses; Faraday e-bike
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 Mitt Romney and Ted Kennedy were about as different as two politicians could be. The lanky businessman and the stout old senator, the conservative darling and the liberal icon. But did you know they once teamed up to tackle an elusive challenge: universal healthcare?
0:16 Speaker 01 This is a politician's dream.
0:18 Speaker 00 In season four of the Big Dig podcast, we tell the story of Romney Care and the odd couple alliance behind it. Find Mitt and Ted wherever you listen.
0:28 Speaker 02 You know, 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.
0:38 Robin Rauzi? You look more relaxed, actually.
0:40 Speaker 02 It's like, cool Catherine is the host today. Like, not economist Catherine Edwards, just like your girl Catherine, talking.
0:47 Robin Rauzi? Yeah.
0:48 Speaker 02 Chill. Hello and welcome to Optimist Economy. I'm economist Catherine Edwards.
0:58 Robin Rauzi? I'm editor Robin Rousey.
0:59 Speaker 02 On this show, we believe the US economy can be better, and we talk about how to get there, one problem and solution at a time.
1:05 Robin Rauzi? This week on Anonymous Economy, we're both wearing sunglasses.
1:15 Speaker 02 We are wearing sunglasses. 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.
1:40 Robin Rauzi? I am, but I'm gonna have to take them off because I can't read anything.
1:44 Speaker 02 This is gonna be a real off-the-cuff episode because I can't read any of my notes.
1:49 Robin Rauzi? I know. We should have done this like as a garden party episode outside.
1:53 Speaker 02 But I'm about 85% sure, based on reading my notes, that we are talking about overtime.
2:00 Robin Rauzi? We are.
2:01 Speaker 02 Overtime.
2:02 Robin Rauzi? 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 Oba.
2:11 Speaker 02 Oba. Announcements?
2:14 Robin Rauzi? Uh, 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 optimist economy dot com.
2:23 Speaker 02 Truly, Optimist, when you give us money, we give it to Andy and Sophie for production. And so, we cannot thank you enough for every donation you give us. In a couple of weeks, we'll be recording our Q and A episodes. So, send your questions about the economy to optimist@[email protected] .
2:38 Robin Rauzi? Also, someone's testifying in front of Congress.
2:42 Speaker 02 We can say here that I will be testifying in front of Congress. Optimist, you don't know this about me, but I've actually testified in front of Congress before.
2:52 Speaker 02 It's like a bombshell, but I have.
2:54 Robin Rauzi? Surprise.
2:54 Speaker 02 And I'm doing it again.
2:57 Speaker 02 So, if this is the day that I'm testifying, I will not be wearing sunglasses inside.
3:03 Robin Rauzi? All right, red con.
3:04 Speaker 02 I have one red con, which is that my executive order that parking, making employees pay for parking is a form of wage theft, was met with the Spotify review. The parking executive order means Catherine has moved back to Houston from DC, fully and spiritually.
3:23 Robin Rauzi? So true. Yeah, when you start demanding free parking, that's like, that's Texas all over, isn't it?
3:29 Speaker 02 Honestly, I feel seen that that is the case. 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.
3:41 Robin Rauzi? Okay, okay. I had just one thing of a red con. You know, we went through a lot of data, economic data that had been reported in that episode. And I'm just curious, like, how confident are you feeling about this data and its accuracy at this moment in time?
3:59 Speaker 02 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?
4:14 Robin Rauzi? I guess my question was the latter. But the former is a really also important point.
4:21 Speaker 02 The data, as good as it was, which is extremely good, but could be a lot better if we invested in the statistical agencies in the US. 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 is that if they make a mistake, if they miss something, they will tell you.
4:51 Robin Rauzi? That's how I feel about news outlets, too. The ones that you trust the most are the ones that actually make the most corrections.
4:57 Speaker 02 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...
5:05 Robin Rauzi? Shout out to us.
5:07 Speaker 02 Shout out to us. We also make mistakes. We're like, pretty strong people. We're pretty self-assured in our personalities. 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. Like, there are problems with the data, but we know what they are.
5:34 Robin Rauzi? We could do, we could do better. We just have to invest in doing it better.
5:38 Speaker 02 Yeah. Now, is it capturing the extent of pain in the economy? I think the answer is going to be no for anyone experiencing pain.
5:47 Robin Rauzi? Well, yeah.
5:48 Speaker 02 Right? Like, if you don't have a job, you don't experience unemployment at 4%. Your unemployment is 100%.
5:54 Robin Rauzi? 100% sure.
5:55 Speaker 02 Yeah, like, your unemployment is 100%. Everybody else's employment is 0%. So the, 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 get the highest.
6:20 Robin Rauzi? Yeah. Okay, terms and conditions. What did you look up?
6:27 Speaker 02 Uh, I looked up because, now believe it or not, even though you weren't there, I once again said something that was 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 tenter hooks with a T. Well, that's mortifying. So then I had to go look up what it means to be on
6:50 Robin Rauzi? Tenter hooks.
6:51 Speaker 02 Tenter hooks and tenter hooks as to deal with the textile industry where like the tent 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.
7:06 Robin Rauzi? Hmm.
7:07 Speaker 02 And so if you're on tenter hooks, it means you
7:08 Robin Rauzi? You've been stretched tight?
7:10 Speaker 02 Yeah. It was weird though, because it really means you're nervous about something.
7:14 Robin Rauzi? Hmm.
7:15 Speaker 02 Which I was like, oh, tender hooks, like it's fragile.
7:18 Robin Rauzi? Hmm.
7:19 Speaker 02 But they use tender. I feel like tenter hooks means you're just, you're stretched so thin. You know, there's no slack and it kind of
7:26 Robin Rauzi? It's a state of suspense or agitation.
7:29 Speaker 02 As opposed to the actual physical tenter hooks that are keeping you as tight and as stretched as possible, which I thought was like, oh, I'll work that in for the overtime episode when we're all so stretched, but it's not the right meaning. So.
7:44 Robin Rauzi? Well, it's also, you're in a state of suspense about the uncertainty of a future event specifically.
7:50 Speaker 02 So I looked up tenter hooks.
7:53 Robin Rauzi? So I looked up perquisite, which I did not know is the origin of the word perk, like perks on your job. So perk became sort of an abbreviation for a perquisite in the mid 1800s. And it's, you know, a thing that's regarded as a special right or a privilege. I mean, 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 Q. That would be much better, right?
8:20 Speaker 02 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.
8:30 Robin Rauzi? Actually, eventually, once when we start giving out things to like subscribers, we'll call them perks with a Q.
8:34 Speaker 02 Oh, amazing, Robin. God, you with the words every time.
8:42 Robin Rauzi? Okay, that's it for the front of the show. We'll be back in just a second for the big pill crow about overtime.
8:53 Robin Rauzi? Here we are, we're back for the big pill crow 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, 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.
9:24 Speaker 02 Yeah.
9:25 Robin Rauzi? 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. Does that sound vague enough?
9:36 Speaker 02 Sounds vague enough.
9:37 Robin Rauzi? Okay, good, good, good.
9:38 Speaker 02 I think we can keep this under four hours.
9:40 Robin Rauzi? All right, excellent.
9:42 Speaker 02 Good luck in post, Sophie, wishing you the best.
9:50 Speaker 02 All right, so overtime. The concept of overtime is that you get paid more than your hourly rate after you work past the standard work week. 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 overuse the workforce they have.
10:21 Robin Rauzi? I mean, it's hard to overstate how overworked the workforce was before we had this, this rule. I was reading about steel workers in particular 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. I mean, the notion of working 24 hours in a steel mill? Is totally crazy. You know, it was it was routine that people would work 12 hour days and then a half a day on Saturday. Seventy to eighty hours a week was not uncommon at all for anybody working at the time.
10:58 Speaker 02 You'd hire people into your workforce and you would work them to the bone. And it was Samuel Gompers of the AFL who became really the one of the first major champions of a limited of an eight hour work day. And even in the 1880s, they wanted an eight hour work day. And if you watch The Gilded Age, this came up because Train Daddy, the the the main, the husband, I don't remember any of their names, but Train Daddy 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 like, 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,
11:42 Speaker 02 eight hours of work, eight hours for what you like. And that came out of Gompers and the labor movement of the 1800s.
11:48 Robin Rauzi? I mean, I read that even came back to the post-Civil War era with Ira Stewart publishing The Eight Hour Movement. I mean, it was
11:55 Speaker 02 Yes.
11:56 Robin Rauzi? Like, people would come out of working for the war effort and were just burned out.
12:02 Speaker 02 Yeah, I mean, it's not it Gompers didn't invent it. He was incorporating 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, kind of through the industrialized era, as more people are subjected to just abysmal work schedules.
12:21 Robin Rauzi? Yeah, yeah. But it isn't until really till the Depression, right? And it doesn't become implemented until it seems like we're trying to spread jobs around, right? Rather than try to work a bunch of people sixteen hours a day, you should have twice as many people work eight hours a day.
12:38 Speaker 02 So Fair Labor Standards Act 1938 is a federal law. It prohibits and regulates child labor. It sets a minimum wage, and it sets overtime provisions. It standardizes the work we get forty-four, and then it, I think it phases into forty. That act was for all workers, not women and children. And in the forty 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 in like, the labor sense.
13:15 Speaker 02 Oh, yeah. And in fact, there's like 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. And the official union labor movement has like 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. And we think of that as natural, but it was a
13:46 Robin Rauzi? It was a big change.
13:47 Speaker 02 Turning point, yeah. 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.
13:58 Robin Rauzi? Yeah, but not everybody was covered by the legislation, right?
14:01 Speaker 02 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 work week, and in terms of which industries were covered by it.
14:13 Robin Rauzi? Like railroad workers are still not covered by it?
14:15 Speaker 02 Yeah, and it expanded over time. So 38 starts at this like 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 like both a high water and low watermark in terms of the protection of workers. But it institutes overtime, which says that if you work more than the standard work week, you have to pay time and a half for your workers.
14:49 Robin Rauzi? And you know what, I think, because I live in California, where we have a law that sets the limit at eight hours a day. But this is, it's a week, right? It's 40 hours a week. So you could do 10 hours for four days a week and not get overtime, or you could do three and a half days at 12 hours a day or something.
15:06 Speaker 02 Yeah.
15:07 Robin Rauzi? And I also read that Project 2025 was like, we should just make that over a month instead of a week.
15:14 Speaker 02 Well, the alternative would have been an actual prohibition. Like, in order to regulate the work week, you were not allowed to employ people past 40 hours. So instead, you can employ people past 40 hours with a penalty.
15:27 Robin Rauzi? Right.
15:27 Speaker 02 And the penalty is meant to encourage you to keep the work week at 40 hours. So then you can, you'll have to hire more people and have standard shifts.
15:36 Robin Rauzi? Right.
15:37 Speaker 02 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 it was followed by a absolute transformation of what it meant to be, say, a production worker in the US in terms of how many hours you worked.
15:58 Robin Rauzi? Okay, so this is 1938. We get the FLSA, and it creates this sort of penalty for overworking people. But it does open a back door, right? Which is this, like, this exemption. And that's kind of like the whole story, to me, about overtime.
16:14 Speaker 02 Yes. In the 1938 legislation, there is a phrase that bona fide, they use the word bona fide. It's Section 13A1, that the minimum wage and overtime provisions do not apply to bona fide executives, administrators, and professionals.
16:33 Robin Rauzi? So this is broadly thought of as sort of the white-collar worker exemption, right? This, the idea is...
16:37 Speaker 02 Actually, they had no idea what it meant at the time.
16:40 Robin Rauzi? Of course not.
16:40 Speaker 02 It's, 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 is like, uh... So they go through, these are the EAP, executive, administrative, professional. The EAP professions. So everybody is subject to a 40-hour work week. Everyone is subject to overtime unless you are an EAP. So they have to define what EAP means.
17:07 Robin Rauzi? Uh huh. We're still fighting about this, right?
17:09 Speaker 02 Still fighting about it. So I'm going to try to give you a condensed history of EAP. This is the exception to overtime. So...
17:18 Speaker 02 Law passes in 38, it's gonna 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."
17:31 Robin Rauzi? Okay.
17:31 Speaker 02 We're gonna say administrator and executive are basically the same thing. And then a professional is someone who has intellectual and varied work.
17:40 Speaker 02 Yeah, so that's their kind of first EAP. And over the course of the next like 15 years, keep in mind, there's a war in between when no one really cares about this. But like, in the years afterwards, they try to come up with what executive, administrative, and professional means. And we arrive at a, starts as a two-part test, ends up as a three-part test. So, in order to be exempted, first part, you have to be a salaried worker.
18:02 Robin Rauzi? Right.
18:02 Speaker 02 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 the either management or intellectual and varied type.
18:16 Robin Rauzi? Sure.
18:16 Speaker 02 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.
18:27 Robin Rauzi? Right. Remember, when I got my first job, I was like, "I don't understand what this means." Being non-exempt just seemed like the biggest double negative.
18:34 Speaker 02 So probably almost everyone listening is exempt. You are exempt from the minimum wage and overtime provisions of the Fair Labor Standards Act.
18:41 Robin Rauzi? Like it or not.
18:42 Speaker 02 Like it or not, because you're a white collar employee. So through the 40s, 50s, 60s, and through the 70s, there, every time they try to update this definition, everybody loses their [BLEEP]. Like, workers lose their [BLEEP], employers lose their [BLEEP]. 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 Fair Labor Standards Act?
19:06 Robin Rauzi? Are you exempt from everything in the Fair Labor Standards Act, or just overtime?
19:10 Speaker 02 Overtime and minimum wage. So in 75, they're like, all right, we have to do this again. We're going to come up with an interim measure, 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 and shouldn't do it. 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 it's put on hold, and it's paused. Same thing with Clinton. He says he's going to touch it,
19:51 Speaker 02 he never does. It's not until 2004 that the interim overtime exemption salary level is addressed. And over the course of that 30-year period, it goes from around, 2/3 of salaried workers in the US are subject to overtime. It falls to around 8% of workers failing the test and getting overtime.
20:17 Robin Rauzi? And when we say get overtime, that doesn't even mean they actually get it. It just means that they, if they work more than 40 hours a week, they would have to be paid overtime.
20:25 Speaker 02 Yes.
20:25 Robin Rauzi? Right.
20:26 Speaker 02 It is really, I think it's hard to convey just how like, revolutionarily bad this was in our economy, because it is as white collar work is growing.
20:37 Robin Rauzi? Right.
20:38 Speaker 02 As more people are moving.
20:39 Robin Rauzi? Yeah.
20:40 Speaker 02 Yeah, like service work, white collar work, people are moving out of the factories, they're moving into retail and service and management and professional business services.
20:47 Robin Rauzi? And administration of various kinds.
20:49 Speaker 02 Yes, and all of that grows essentially outside of the umbrella of FLSA protection as opposed to underneath it.
20:59 Robin Rauzi? What's pretty amazing, too, is, you know, in 2004, that salary threshold was $23,660, right? And 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.
21:19 Speaker 02 Oh, the number was frozen between 1975 and 2004. And then in 2004, they raised it to 22, whatever, $3,000.
21:30 Robin Rauzi? $23,660.
21:32 Speaker 02 Yeah, $23,660. Sorry, I can't read my notes because of the sunglasses. I keep trying to find it on the page, but I can't. But, I mean, it was like, it's frozen in time between 1970, nominal terms, frozen for 30 years. And when they move it up, it's still below the poverty line.
21:49 Robin Rauzi? Yeah, yeah.
21:50 Speaker 02 And it was, I mean, credit to the Bush administration, at least they raised it.
21:54 Robin Rauzi? Yeah.
21:54 Speaker 02 The only Democratic president in that time period had eight years to do so and did not. So we, it's not just that the standard was left to erode, it was that growth occurred outside of it. And so now we have a cultural, like now, two generations later, culturally, most American workers have no idea that even if your salary, you should be subjected 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.
22:36 Speaker 02 But to get 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. And by the end of the Biden administration, they get the standard up to the equivalent of $35,568, AKA $684 a week. That's what it is in 2019.
23:20 Speaker 02 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 US 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. Like a week after Trump wins reelection in 2024, a federal judge says that it's not allowed and the new Trump administration is basically like, they've appealed it, but they're not fighting the appeal. So this was like a massive victory. And I mean, like, talk about snatched.
23:58 Robin Rauzi? You know, yes and no, because this had happened before. This is what happened to Obama and when in the Obama administration where they tried to raise it to almost $48,000. And I think it was the same court, right?
24:09 Speaker 02 Probably the same judge, it's a guy in Texas.
24:11 Robin Rauzi? The same judge, guy in East Texas who says, but he goes back to this stupid three-part rule. Right. And says, well, you can't just change the salary level. You know, because now you're ignoring the duties and job role. Piece of how we calculate who's going to get overtime, right?
24:32 Speaker 02 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 the 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 a classified employee, non-exempt. And that's how I was paid. I was paid hourly. 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 DC and I had easily the best job out of everyone I knew.
25:12 Speaker 02 Because all of these like 22 to 25 year old junior staffers working at think tanks, working at research firms, working at consulting firms, they all worked horrible hours.
25:21 Robin Rauzi? Yeah.
25:21 Speaker 02 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.
25:31 Speaker 02 But I like, I'm so lucky I had this job. I am so lucky I had this job because I'm in my first job, first real job that's full time, that has a salary. I would log my hours in and out every day. And on Friday afternoon, the woman who ran HR would say like, you need to clock out by three.
25:50 Robin Rauzi? Oh, because you'd already worked too many hours that week.
25:52 Speaker 02 Because I 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, Catherine?
26:02 Speaker 02 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, whoa, really? So you can see why, when I got my second job, I actually, me and management clashed all the time. I'd be like, yo, yo, you are not doing your job. But I, I think it was just like, this is a basic dignity. Like, you are 22, you're an idiot, you have no idea what you're doing. We gave you a task on 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 was like gifted in life.
26:46 Robin Rauzi? Yeah.
26:46 Speaker 02 That I am now 20 years deep into thinking that that is the rule and not the exception. It was a gift, but...
26:53 Robin Rauzi? Not a gift most people got, yeah.
26:55 Speaker 02 Not a gift that most people got. And imagine how like 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.
27:06 Robin Rauzi? Mm-hmm. So basically, we wind up in this situation where there's still this two to three-part test, but really, the salary test is the one doing all of the heavy lifting.
27:16 Speaker 02 Yep.
27:17 Robin Rauzi? And so, when the salary threshold goes up, then what happens? I mean, isn't that essentially what this paper studied?
27:26 Speaker 02 Yeah, so this is one of my, of papers that have come out in economics in the last 10 years. This one is a personal favorite.
27:33 Robin Rauzi? It's a good one.
27:34 Speaker 02 It's a good one. So, from 1975 to 2004, the salary cap to get overtime erodes. In 2004, the Bush administration increases the salary exemption. Does this actually make a difference? Did this matter in the economy? I mean, did people actually get overtime? Well, that's not what they found. What the 2004 cap created was a bunch of people who used to be not eligible to get overtime, and now they were.
28:06 Robin Rauzi? Okay.
28:07 Speaker 02 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 give 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. So the most egregious example came from the Family Dollar store. So it gave a very large share of its employees, the title of store manager. And their job would be like sweeping.
28:42 Robin Rauzi? Stalking shelves.
28:43 Speaker 02 Like you are the store manager in charge of shelves. You're the store manager in charge of sweeping.
28:47 Robin Rauzi? 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.
28:58 Speaker 02 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. $35 million to 1,500.
29:12 Robin Rauzi? Was that punitive? Or was that just, that's actually just how much money the wage theft had been?
29:16 Speaker 02 No, that was pay due.
29:17 Robin Rauzi? Oh, my God.
29:18 Speaker 02 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. So let me find some of the titles. This is the best part.
29:33 Robin Rauzi? No, my favorite is Director of First Impressions.
29:36 Speaker 02 Oh, yeah. Director of First Impressions. 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? I mean, these are, these are absolutely ridiculous titles.
30:00 Robin Rauzi? A reservations clerk was the lead reservationist.
30:03 Speaker 02 Oh, the lead reservationist. But like a hostess at a restaurant would be the director of first impressions.
30:09 Robin Rauzi? First impressions, yes.
30:10 Speaker 02 Yeah. A greeter, like a Walmart greeter would be a manager of consumer expectations.
30:17 Robin Rauzi? Yeah, these are, these are crazy.
30:19 Speaker 02 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.
30:31 Speaker 02 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 hours, or 60 hours, or 90 hours a week without penalty, is gross. We do have a law to prevent it, and it has fallen into disuse.
30:49 Robin Rauzi? Yeah, I mean, it's such abuse. And I don't think that I realized that unpaid overtime wages are like 80% of the wage theft FLSA cases.
30:59 Speaker 02 Overtime is everything when it comes to labor standards, because this is, 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.
31:16 Robin Rauzi? Totally.
31:16 Speaker 02 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.
31:31 Robin Rauzi? Totally. Like, they're stealing, yeah, they're stealing your full hourly, every hour beyond that. It reminds me of, oh, what's that movie?
31:39 Speaker 02 Office Space?
31:40 Robin Rauzi? Office Space, yeah. I'm gonna need you to come in on Saturday. You know, like, the, the idea that, that you're salaried and therefore you're at the whim of your bosses to come in and work additional hours on Saturday.
31:56 Speaker 02 Yeah, it's, 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 for you from free because they're avoiding labor regulation. Yeah, it took me a while to get there, but 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.
32:17 Robin Rauzi? Yeah. Well, and they don't know that they're giving it away for free.
32:22 Speaker 02 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. And my relative hourly pay is a lot lower on a salary.
32:55 Robin Rauzi? 20% lower.
32:55 Speaker 02 The more hours I work. And so this is, I don't know, I think on some issues I can be like really like centrist and be like, I'm a capitalist. I love capitalism. We can do this. On other issues, I feel like I'm like, you know, 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 work week is 40 hours. This is ridiculous. You know, 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.
33:28 Robin Rauzi? Yeah.
33:29 Speaker 02 We want to. And we have the legislative power to do so. And we've had administrations, successive administrations, who have tried to get this protection for workers. But it's so like behind the scenes. Now it's been two generations. Like, we have gotten so divorced from this mindset of it doesn't matter if I work in an office, I still deserve.
33:50 Robin Rauzi? Yeah, your time is your time. Yeah.
33:52 Speaker 02 Your time is your time and they're stealing it. We keep saying overtime and we keep saying overtime, but really, this is about limiting the work week. 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. You don't have limitations on your work week anymore.
34:12 Robin Rauzi? Yeah. I thought the other interesting part of that study was that they also looked at where this title inflation was most common. 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 the most in states where they knew that the wage in our, or the Bureau of Labor in that state wasn't going to do anything about it.
34:35 Speaker 02 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.
34:50 Robin Rauzi? Right.
34:51 Speaker 02 So if the salary cap is 22,000, you would see the bump to director of first impression came from people who made 23, not 21. It was absolutely a tool to get over the cap and to get around having to pay overtime and limit the work week. And what I thought was really interesting is that they took the time to be like, and just so you know, they didn't have better careers. It wasn't as if they actually becoming a director of first impressions was actually putting you on the career track to succeed at this company. It was just a way to get around work week caps.
35:22 Robin Rauzi? In fact, I think they found that it costs them higher turnover, right? But they don't care. Because they may save, they save 13% on compensation, but they lose 4% or 5% in turnover. They're still coming out ahead.
35:36 Speaker 02 Yeah, 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? So you could say, this doesn't apply to me. I'm not a low wage worker. I'm not at a family dollar. I'm not at a Petco. This isn't me, like, I work in an office. Maybe this really complicated three-part test of 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 in this way. Pretend that in 1975, the federal government eradicated the overtime provision and said,
36:18 Speaker 02 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 work week in 2026? The answer is, obviously, we're going to work more. They didn't make it so clear. It was, 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. Back to it later, but they don't get back to it later. I mean, like, 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. It's the end of the story.
37:00 Robin Rauzi? Yeah, yeah. Could we talk just for a second about the no tax on overtime?
37:05 Speaker 02 Yeah.
37:06 Robin Rauzi? Situation? Like, what, what a mess.
37:09 Speaker 02 Yeah. So, in theory, you could say, like, oh, no tax on overtime. That's helping workers who get overtime, like, that's helping the working class. No.
37:19 Robin Rauzi? Okay, first of all, most people aren't getting overtime.
37:21 Speaker 02 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.
37:42 Robin Rauzi? So, in other words, you make $20 an hour, but you, 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.
37:56 Speaker 02 So, I hate this rule because it's basically subsidizing the use of overtime.
38:00 Robin Rauzi? Yeah, right?
38:01 Speaker 02 That defeats the whole damn point. Like, we want overtime to be, okay, we want overtime to be incredibly expensive for employers.
38:08 Robin Rauzi? And punitive for overworking workers, right?
38:10 Speaker 02 Yes. You work someone 60 hours a week, you're an asshole. You need to, you're, we're gonna 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 work week. This tax deduction for overtime is doing is subsidizing the penalty to reduce it, because now your workers... You're basically like
38:37 Robin Rauzi? It's like, it's this crazy like backwards incentive.
38:40 Speaker 02 You're incentivizing employees to disregard the overtime, to disregard the
38:46 Robin Rauzi? You're incentivizing employers.
38:48 Speaker 02 So, yeah, but you're incentivizing employees too, because you're trying to tell employees like, "Oh, like, we'll make it more worth your while by having this big deduction as a way to stretch the work
38:58 Robin Rauzi? It's true. 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, right? It's just bonkers. It's a 180 degrees from the idea of penalizing companies for overworking their employees. It's now, we're going to subsidize it.
39:16 Speaker 02 It's, this is like the, the like crowning achievement of eroding the success of having a 40-hour work week is 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 work week.
39:36 Robin Rauzi? Yeah. I mean, and that doesn't even get into the mess of, no employers were 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. And 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, in this deduction.
40:02 Speaker 02 This is basically taking two employees that make the same amount of money, but one of them makes it working 40 hours a week, and the other one makes it like 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. Right? You're putting your thumb on the scale for, we want to encourage people who are working longer as opposed to having normal work weeks. This is putting the weight of the federal tax system on the side of working longer.
40:36 Robin Rauzi? God. The more I read about this, the more, I don't know, the more crazy making it was. It's just, at the time, when I remember reading about the no tax and overtime, no tax on tips, I was like, this is just a political sop and I'm frustrated with that. But when I really thought about what it was incentivizing, I thought, this is really disgusting.
40:55 Speaker 02 Mm-hmm, mm-hmm. Sometimes I think it's helpful to think about it in like 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 70th 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. Like, no, the whole point was so that we get to have [bleep] lives and not work all the time.
41:34 Robin Rauzi? Yeah.
41:36 Speaker 02 I, this, yeah, I think it's because of my amazing first employer that I feel so
41:41 Robin Rauzi? strongly.
41:42 Speaker 02 strongly about this. But I also think that this is one of these, this is something that could affect you that you probably don't realize. That this could be a difference maker in your life.
41:55 Robin Rauzi? Oh, yeah.
41:56 Speaker 02 I don't know, 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 of like, 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, come on. Like, how radical can it be as a law if it's from 1938?
42:31 Robin Rauzi? Yeah. Well, so here's my question, right? Given what this judge in East Texas keeps doing, which is to say, it's, you can't just raise the salary threshold, you have to do something about the two-thirds or other halves of the duties test.
42:48 Speaker 02 The duties test.
42:49 Robin Rauzi? But we could fix the duties test, right? Like with an update to the FLSA.
42:53 Speaker 02 Or Congress just amends the.
42:55 Robin Rauzi? Yeah, exactly.
42:56 Speaker 02 Yes.
42:56 Robin Rauzi? It's not like it's a constitutional amendment. It's just a law.
43:00 Speaker 02 It's just a law. So, so, so right now, all of the changes in this test are coming from administrative rulemaking from the Department of Labor that at various points, judges, this one guy keeps striking down as like it's 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 amendments. It increases the minimum wage to $15 an hour. And then it says, and oh, by the by, section 13A1, that says, who are the people exempt from the minimum wage and overtime? Like, they could set it at whatever they wanted.
43:35 Robin Rauzi? Right. This doesn't seem like a really hard fix.
43:38 Speaker 02 I know people who want to use this, the similar philosophy to mandate that Americans get 10 days of vacation every year because that will also increase employment because you're just taking a bite out of the total hours and they have to hire more people. Just a kind of a similar, how much is an employer allowed to sap of your time?
43:55 Robin Rauzi? Yeah.
43:55 Speaker 02 So, let's just put that down on paper. But there are still a bunch of like 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.
44:13 Robin Rauzi? Yeah, I, you know, I do think that it, the other thing that's skewed this is that people don't want to hire more workers because, 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.
44:30 Speaker 02 So many things are so screwed up because of benefits.
44:31 Robin Rauzi? Perks.
44:32 Speaker 02 So I will say, when the Fair Labor Standards Act was, I think it was either passed or being debated, FDR had this quote that I have always really loved. "Do not let any calamity-hawling 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."
44:53 Robin Rauzi? Yeah, seriously.
44:56 Speaker 02 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 fiancee there because she also wanted to front and made it into like a girl's 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. In that case, you don't get to take a rocket, you just get to take a hot air balloon and go up real high and come back down. You don't actually get to go into space. Too bad. Oh, no. I bet we still have an economy.
45:29 Speaker 02 So cheers to Putin, CEOs, and a hot air balloon instead of rockets.
45:38 Speaker 02 Calamity, howling executive. What a great turn of phrase.
45:41 Robin Rauzi? It is. It's pretty great. It's pretty great.
45:42 Speaker 02 He's not even like my top five favorite presidents, but the man had a way with words.
45:48 Robin Rauzi? All right, we'll be, we're gonna take a break. We'll be right back with executive orders and spiritual sponsors.
45:57 Robin Rauzi? Executive orders. What's your executive order this week?
46:00 Speaker 02 Okay, so mine is, in theme of the show, similar to the, 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 of 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 hours.
46:23 Robin Rauzi? Special hat. Yeah.
46:25 Speaker 02 Yeah. So, I mean, like, can you imagine if you're in like 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, that one.
46:35 Speaker 02 The other one. But yeah, I think there should be some kind of like public signaling mechanism of like, I'm working more than 40 hours so people can see how ridiculous it is that we are broadly expected to work 50-hour weeks all the time.
46:48 Robin Rauzi? Yeah. My executive order is more petty, which is, I believe that some percentage of new cars, when they make them, that they have to be in a color that's not just on the like 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.
47:11 Robin Rauzi? God forbid, you want a car that's not, you know, monochrome.
47:15 Speaker 02 I endorse this. Like, we need more.
47:17 Robin Rauzi? Yes.
47:17 Speaker 02 We need more car colors.
47:18 Robin Rauzi? Gosh. Yeah. Okay. Spiritual sponsors.
47:24 Speaker 02 My spiritual sponsor for today's episode is Awesome First Bosses because my life, my whole work life is better because I had good first bosses.
47:34 Robin Rauzi? Nice. 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. You know, I live on top of a fairly steep hill and it's like, it's like being a superhero, going up the hill on that, on that e-bike. It is honestly probably the, one of my favorite belongings. It's that bike. That and these sunglasses.
48:02 Speaker 02 All right. Thank you for putting your sunglasses back on for the end.
48:11 Speaker 02 The Optimist Economy podcast is edited by Sophie Lamond and our video production for social media is by Andy Robinson. Snabbing him out. Video clips from the show for you to share are on TikTok, Instagram, Facebook, YouTube, and LinkedIn. And you can buy t-shirts, hats, and tote bags on our website, optimist economy.com. And optimist economy.com is beta testing a new feature that has the transcripts for each episode that you can pull out a quote and either copy it into a text message or share it on social media. We're beta testing this. Y'all tell us what part doesn't work.
48:45 Robin Rauzi? Is it live? Is it live already? Or it will be?
48:47 Speaker 02 I think so. Yeah, sure.
48:50 Robin Rauzi? It will be by the time this airs. If you're on Substack, either as a free or paid subscriber to Optimist Economy, you can join our chat room. And if you have the means to contribute at whatever level is comfortable for you, we always appreciate it. Click donate at optimist economy.com.
49:07 Speaker 02 And if you were in your 41st hour of work for the week, go home.
49:11 Robin Rauzi? That's right.
Previous Can the U.S. Go ‘Cashless?’ Next Should We Cherish the Ultra-Wealthy? (a.k.a. ‘The Cornfield’) Page updated October 30, 2026 · transcript and summary are machine-generated