Overtime protections as a bridge to living-wage work

In our last blog post on the recently announced changes to the Fair Labor Standards Act (FLSA), we discussed the financial security that a full-time, salaried job with benefits offers to families. Far too many low- and moderate-income Southerners who work full-time, however, do not fully benefit from the increased security of predictable and limited hours. One of the big reasons for this gap is that, until the new changes go into place in December, the intended overtime protections under the FLSA allow some industries to take advantage of outdated regulations, paying poverty-level wages to full-time workers who consistently work above and beyond the 40-hour work week. With the current salary test for exempting an employee from overtime protections ($455 a week in earnings), a single adult with three children is below the poverty line, and well below what it takes to make ends meet.

According to an analysis by the Economic Policy Institute, the groups most likely to benefit from the new overtime rules are predominantly women, workers under age 35, racial and ethnic minorities, and those with lower levels of educational attainment. Below, we examine the trends and current earnings gaps by gender, race, educational attainment, and occupations that are most likely to be affected by the new overtime rules.

FLSA changes in brief

The U.S. Department of Labor issued a final notice of rulemaking that will increase the share and number of workers eligible for overtime protections. Specifically, the ruling increased an outdated salary threshold used to determine eligibility for exemptions from overtime protections: the old threshold of $455 per week (last adjusted in 1975) was updated to a new threshold of $913 per week. The new salary threshold for an overtime-exemption will go into effect on December 1, 2016. In short, a portion of workers that make more than the $455 threshold and less than the $913 threshold will likely get an immediate wage bump. A large percentage of these workers live and work in the South  and are likely to benefit from greater financial security and work-life balance that enables the pursuit of additional postsecondary education or training to meet the requirements for the jobs of the future.

Who is likely to benefit from these new rules? And how does educational attainment factor in?

Women: The gap in median, full-time, salaried weekly earnings for men and women is closing, but the need for progress remains. In 1979, women’s median weekly wages were only 62 percent of their male counterparts; in 2014, that figure was 83 percent. While women now account for a greater proportion of workers in professional occupations, continued growth and representation in occupations that offer a living wage is necessary to close the gender wage gap.Who benefits from new FLSA rules?

Young Adults: Nearly 36 percent of the workforce directly benefiting from the new FLSA rules are in the 16-34 demographic. An even higher share of the group’s salaried workforce is projected to benefit than other age groups: 33 percent of 16-24 year olds and 29 percent of the 25-34 years.Salaried workers benefited from increase in overtime salary threshold

Adults with less than a college education: A postsecondary degree or credential has long been the strongest predictor of securing a full-time, salaried job in today’s modern economy—but when disaggregated by race and gender, the median weekly earnings for full-time salaried workers are either below or barely above the new threshold for blacks, Hispanics, and women. For workers with less than a bachelor’s degree, weekly earnings are well below the new $913 threshold, and for those with less than a high school diploma, right at the 1975 threshold of $455 per week.

Median usual weekly earnings, by educational attainment

As shown in the chart below, adults with some college or no college are disproportionately likely to benefit from the changes to the FLSA. Nearly 62 percent of directly affected workers have some college education or none, and the share of workers by educational attainment is highest among those with at least a high school education (38 percent).Distribution of workers directly affected by changes

Occupations: According to an analysis done by EPI, workers in a set of 13 occupations are most likely to directly benefit from the new changes to the FLSA. Leading the group are two white-collar categories: management, business, and financial occupations; and professional and related occupations. Also on the list is service-sector occupations—a segment of the Southern economy that is growing more rapidly than most.

 

Occupations that benefit from FLSA changes

A family-supporting wage is a critical element of the Infrastructure of Opportunity

Far too little of the South’s current workforce are earning family-supporting wages—a product of policies, funding, and systems that have continued to produce low educational attainment and employment opportunities in the region. The changes to the FLSA and overtime regulations are expected to largely benefit women, people of color, young adults, and those with lower levels of educational attainment. Changing how work is compensated in the South, however, is not a silver bullet for stalled economic mobility in the region. In order for the South to succeed economically, states and communities must prioritize the building blocks of an Infrastructure of Opportunity for their citizens. As the data above suggest, educational attainment is and always has been the best predictor of a family-supporting wage. For those workers who represent the working-poor, the new FLSA changes offer the potential for an immediate wage boost and the potential for the time and flexibility to pursue a valuable certificate or degree to take the next step in their career.

North Carolina’s Economic Imperative: Building an Infrastructure of Opportunity

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Since its inception, the State of the South blog has examined patterns of economic mobility and educational progress across the region, looking at what demography and geography say about who is being successfully prepared for educational and economic success. In a new report commissioned by the John M. Belk Endowment, we applied this lens to the state of North Carolina—a state that prides itself on being a beacon: from creating the nation’s first public university and one of its earliest community college systems to pioneering the concept of research parks that bridge education and industry.

But as we’ve seen across the South, far too many people in the state are struggling to make ends meet. Even in the most economically dynamic metros like Charlotte and Raleigh, people who grow up in low-income families are more likely to stay there as adults than almost anywhere else in the nation, and only small numbers make it to the middle- or upper-income levels despite thriving labor markets that seem full of opportunity. For young people born in the lowest quintile of the income distribution in Charlotte, for example, 38 percent will stay there as adults, another 31 percent will only move up one quintile, and just 4 percent will make it to the highest quintile.

Other statistics in the report are equally troubling:

  • Upward mobility in 22 of North Carolina’s 24 regions called “commuting zones” ranks within the bottom quarter nationally—and Charlotte, Raleigh, Fayetteville and Greensboro rank in the bottom 10 of the nation’s 100 largest commuting zones.
  • While mobility varies depending on where people live, only about one-third of children born into North Carolina families making less than $25,000 annually manage to climb into middle and upper income levels as adults.
  • Latinos and African Americans are more likely than whites to be in poverty and attain lower levels of education, leaving them less prepared for high-skill, well-paying jobs—and those disparities will increasingly affect North Carolina’s economy as these populations grow to make up a larger proportion of the population.
  • A family of one parent and one child needs an income of $21 an hour to cover basic living expenses in North Carolina, yet only 26 percent of full-time jobs pay median earnings of that amount.

While there is significant variation in mobility levels across North Carolina, no part of the state meets the national average. These mobility patterns, paired with the rapidly changing demographics of the workforce, have significant implications for North Carolina. Gov. Pat McCrory’s postsecondary goal is to ensure that by 2025, 67 percent of North Carolinians will have education and training beyond high school. And there’s good reason for a goal like that: while 31 percent of North Carolinians who attain only a high school degree live in poverty, just 5 percent of people with a bachelor’s degree do. In order to meet the 2025 goal and the competitive demands of a 21st century economy with a skilled workforce, we need to reduce disparate outcomes in education along racial and ethnic lines.

These are not issues for individuals alone, but for communities and states: If North Carolina’s business and industry is to thrive, it is imperative that the citizenry have the skills and training necessary to thrive, too. Since this progress has to happen for individuals where they are—in our rural towns and our metropolitan centers—we profiled eight communities across the state, looking for evidence of vision and practices that generate forward motion for individuals and communities. Within these communities, we saw everything from a rural, four-county region with an intertwined history and economy but limited access to living-wage work with career potential, to a city in one of North Carolina’s fastest growing counties with a diverse manufacturing sector and a growing Hispanic population—and just about everything in-between. We saw efforts that were inspiring in both aspiration and implementation. For example:

  • In Pitt County, educational institutions and economic development leaders are investing together to address needs of both the working population and industries, like the recent collaboration between Eastern Carolina University and Pitt Community College: the Biopharmaceutical Workforce Development and Manufacturing Center of Excellence. The center will link education and industry to ensure that residents looking to enter advanced manufacturing in health sciences are trained in the specific skills needed in Pitt County’s growing economy, attracting both workers and new industry.
  • Wilmington’s Blue Ribbon Commission on Youth Violence used an assessment of local food insecurity, school dropouts, and gang violence, as well as a scan of community resources and organizations, to guide their decisions about how and where to act. The Commission of leaders from the faith-based community, private businesses, local nonprofits, and elected officials is charged with coordinating resources, with a focus on youth ages 0–24 and their families. The analysis informed the creation of a Youth Enrichment Zone, a geographical area in the city where they target programmatic activity and investment.

(Read the full report for stories from Guilford County; Wilkes County; Fayetteville; Vance, Granville, Franklin, and Warren counties; Monroe; and Jackson, Macon, and Swain and the Qualla Boundary.)

The causes of economic immobility do not exist in a vacuum, but are part of systems that can both ease and impede individuals’ access to opportunities. Improved access can often give them more control over economic outcomes for their families and, in many cases, break the cycle of intergenerational poverty. This requires a strong infrastructure of opportunity—a clear and deliberate set of pathways and supports that connects individuals to postsecondary credentials and economic opportunity regardless of background. The creation of that infrastructure of opportunity is beyond the reach of any single institution to create: discrete pockets of excellence are insufficient for changing the trajectory of broad opportunity and improving education and employment outcomes at scale. To move from discrete programming to an aligned infrastructure of opportunity requires:

  • adoption of a guiding framework for communities to assess and create an action plan that is grounded in a common vision of economic productivity and advancement for the community and its people
  • design and implementation of research-based policies and programs that can be scaled for an entire population, hold high expectations for educators, employers, and the workforce
  • maintaining momentum through continuous improvement
  • commitment to providing adequate resources that support the common vision.

“One key piece of the solution,” says MDC President David Dodson, “is that corporations and businesses need to play a bigger role in working with educators, government and community organizations to ensure we are developing the talent our advanced economy needs, and guiding students toward better paying jobs that are in demand and can elevate their quality of life.”

Expect More Jobs, Education, and Opportunity

When we talk about the future of work, we often look at the number of jobs likely to be created in aggregate, with special attention paid to entry level jobs for recent college graduates. The pipeline of labor and the strength of our economy are dependent on people believing that education has a great return on investment and that the investment increases the economic mobility of each generation—parents encourage their kids to go to college because they want them to do as well or better than they have.

And there’s plenty of evidence to support that belief: the economic trajectory of people with a postsecondary degree is far more secure than those who were not able to pursue education after high school:

  • Median earnings for bachelor’s degree recipients working full time is $21,000- $56,000 more than the median earnings for high school graduates
  • Over 10 percent of high school graduates age 25 and older live in a household that relies on SNAP (Supplemental Nutritional Assistance Program) benefits, compared to 2 percent for those with at least a bachelor’s degree
  • According to the Pew Charitable Trusts, only 10 percent of children born in the lowest quintile of the income distribution who get a four-year college degree remain in that quintile as adults, compared to 47 percent of those without a four-year degree

But in much of the South, too few jobs require a postsecondary education and allow for economic security. Arkansas, for example, added 40,000 jobs between 2010 and 2013 and the state is forecast to add 546,000 jobs by the end of 2023. Nearly 70 percent of current jobs are low-skill and only 30 percent of jobs require a postsecondary credential for entry-level employment. Low-skill jobs are also conflated with lower wages, producing a workforce that is unable to move up the economic ladder and generate significant economic growth through their consumption, investment, and tax dollars. In Arkansas, 87 percent of jobs that pay less than a family-sustaining wage are those that don’t require education beyond high school. Moreover, in 2013, 65 percent of the jobs in the state did not meet that yearly threshold of a family sustaining wage.

Arkansas is not alone in this issue. The low-wage, low skill economy is an issue throughout the South. MDC called attention to the lack of well-paying jobs across the region in the State of the South report, and we are currently preparing a study of economic mobility in North Carolina that raises similar concerns about the low-wage jobs in our home state. And as you can see from the maps below, the states with the most jobs for high school dropouts are in the South while the opportunities for growth for those with bachelor’s degrees are in the North and the Midwest.

Educational concentrations of total jobs by state in 2018

PS jobs

Source: Georgetown University Center on Education and the Workforce, Help Wanted: Projections of Jobs and Educational Requirements through 2018 (June 2010)

HS drop

Source: Georgetown University Center on Education and the Workforce, Help Wanted: Projections of Jobs and Educational Requirements through 2018 (June 2010)

The Winthrop Rockefeller Foundation, headquartered in Little Rock, Arkansas, understands that career opportunities that pay family sustaining wages are important for the Arkansas economy, and that students need to realize the return on investment of postsecondary education within their home state. The Foundation wants students, parents, policymakers, educators, and employers to EXPECT MORE. The EXPECT MORE campaign asks people in the state to change the status quo by investing in the right advanced-skills training and education, investing in every region of the state to attract family-supporting jobs, and redesigning career pathways that offer family-supporting wages. The goal is to reverse the 70-30 equation (of jobs that require no postsecondary education for entry-level employment compared to those that do) through a series of strategies to transform the Arkansas public education system and build a pipeline of family-supporting jobs across the state.

Check out more videos from the EXPECT MORE website to learn more about how Arkansans are building an Infrastructure of Opportunity for their future. You can join MDC and The Winthrop Rockefeller Foundation in a conversation about how Arkansans can make sure tomorrow’s jobs are better by live streaming the event today at 1:00 pm EST at the Clinton School of Public Service.

Your Daughter’s Teacher Needs a Raise

The beginning of the year always makes me revisit my annual budget, evaluate my savings plan, and start to think about taxes. As I think about the additional amount of money I still need to save for my family to be comfortable in the future, I am reminded that there are many people I encounter on a daily basis that are not as fortunate. When it comes to having enough income to cover my basic expenses, I’m lucky. I can pay my bills and still save for my family’s future—assuming we don’t have any unexpected medical expenses that deplete our savings. My job pays me a family-sustaining wage, but what about the people I depend on to take care of my family and me on a daily basis?

Last year, Fortune reported that more than 42 percent of U.S. workers hold jobs that pay a low wage. The article assumes any job with wages below $15 an hour is a low-wage job. The $15 an hour rate is based on national studies which have calculated an equilibrium where wages are high enough to lift families out of poverty, but still low enough to not result in massive job losses. In North Carolina, the percent of jobs paying a low wage is 48.7 percent.

We often associate jobs that pay low wages in our economy with low skilled or unskilled labor. Many of us think of fast food jobs and teenagers. However, many of the jobs that pay a less than what is needed to maintain a normal standard of living are the very jobs our society depends on to take care of our family members and teach our children. As the Fortune article points out, low-wage jobs are held disproportionately by women, people of color, and persons 20 years of age or older.

Is $15 an hour enough?

Another definition of low-wage job is one that pays less than a living wage, which is defined as the amount of money a person must earn to cover their family’s basic living expenses. In 2014, MIT and the Living Wage Project calculated the living wage for North Carolina to be $10.53 for one person, living alone. The addition of children obviously increases a family’s expenses. Hence, one adult with a one child will need to make $44,990 a year ($21.63 an hour) to break even every month. This amount does not include emergency savings or funds to splurge on birthday and holiday gifts. Overall, 72 percent of our state’s workforce makes less than $44,990 a year. Here are the living wage calculations for other family configurations:

NC Living Wage

Many of the jobs that pay less than a living wage typically require postsecondary credentials and are occupations that are growing in our economy:

NC Occupations Wages

Half of the preschool teaching jobs in the state earn less than $11.35 an hour. At this wage rate, someone working as a preschool teacher, with a child at home, would not be able be able to cover his basic living expenses. He would not be able to save for his family’s future, and he is probably asking himself a different set of questions at the beginning of the year. All of the jobs listed in the table above require some kind of investment in postsecondary training; the very investment that is touted for getting ahead and securing employment that leads to economic security. But the investment can’t just be on the worker’s side of the equation. We have to invest in making those jobs that require skill and training—and there aren’t many jobs that don’t—quality jobs that provide wages commensurate with the training and value they bring to individuals and communities. Our society is dependent on a host of skilled labor to take care of our families, so we need policies and wage rates that help them take care of theirs.

Half a Million Halfway There: Young Southerners Not in School or Work

A recent update to the Annie E. Casey Foundation Kids Count Data Book shows that 1.3 million youth ages 16-19 in the U.S. were disconnected from both work and school in 2014. That’s a national disconnection rate of 7 percent. In all Southern states except Virginia, the rate is at the national average or higher:

DisconnectionRateinOlderTeens_LARGE

Source: Kids Count

In total, nearly half a million youth ages 16-19 in the South were disconnected from both work and school in 2014:

DisconnectionRateinOlderTeens_Table

Source: Kids Count

 

U.S. youth disconnection also is higher than average for OECD countries, as shown below.

What’s a NEET, you ask? That’s the UK acronym for young people that are Not in Education, Employment or Training. Wherever you are, a delay in high school graduation, postsecondary study, and employment can have life-long consequences, so national and local governments are investing in a variety of programs to get these youth on track. In the UK, that means apprenticeship grants and wage incentives for businesses that employ young people; sector-based work academies that offer training, work experience, and a guaranteed job interview; funding for local initiatives that support education; and training for these young people. In the South, we see some similar efforts, like the South Carolina Technical College System’s Apprenticeship Carolina initiative; All In Brownsville that is, among other things, increasing the college application rate of the Texas town’s high schoolers; and local partnerships like Made in Durham that are linking educators and employers to help young people stay connected.

But efforts like these are operating in a South that still doesn’t have enough good jobs. Poor labor market opportunities are hitting our young people—particularly our young people of color—the hardest: 27 percent of black 20- to 24-year-olds, and 14 percent of white 20- to 24-year-olds, are unemployed—twice the levels for workers 25 and older. And even if employed, those without education struggle to get ahead: in the South, the median income of high school graduates is $26,500; for people with some college, $32,299; and for four-year graduates, $48,317. All the more reason that we need to build an Infrastructure of Opportunity—the systems that provide pathways to opportunity and re-connection efforts—to ensure access to education, employment, and training for all the young folks on that map.