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The Severance Tax & the Budget: Flat on Our Backs Again?

November 11, 2015 - 1:23pm

Will Charlie Brown end up on his back again as Lucy whisks the football from the tee?

This budget season it looked like a severance tax on natural gas drilling was finally teed up to be successfully kicked through the uprights. Candidate Tom Wolf made it the centerpiece of his campaign for governor, vowing to use the revenue to replace the disastrous funding cuts to education made under former Gov. Tom Corbett. Voters rewarded Wolf with the governor’s office, and all subsequent polls show voters continue to strongly support a tax on gas drilling. All the public policy arguments are on the side of a drilling tax as well.

But recent news reports indicate a severance tax has been whisked from the budget negotiating table.

Gov. Wolf initially proposed a 5 percent tax on the value of the gas extracted from under our land and a 4.9-cents-per-MCF production tax – almost identical to the levy in place in neighboring West Virginia. His proposal would have directed the lion’s share of the revenue to education funding with smaller amounts earmarked for economic development, clean energy and oversight of the gas drilling industry. Again, polls showed that voters approved of his overall budget proposal and especially liked the tax on gas drilling.

The governor proposed compromises which Republican leaders simply rejected. By July, news reports indicated that the governor had dropped the proposed severance tax rate to 3.2 percent that would have been in addition to the existing impact fee, which goes to municipalities where drilling occurs.

In response, Republican leaders only stiffened their opposition to a severance tax, even though as production has soared, impact fee revenue has declined. Meanwhile, state corporate taxes paid by drillers have dropped below the amount they paid in 2008 at the start of the shale boom.

The shale industry claims it cannot afford a severance tax because its over-production has created a supply glut and lowered gas prices. Instead of cutting back on production, gas companies are looking to tap even more abundant gas resources in the Utica formation which lies underneath the Marcellus. The perverse economics of the industry promise to keep the prices low for many years to come.

From the perspective of the voters, now is the time to finally enact a severance tax in Pennsylvania as every other major gas-producing state has already done. From the perspective of the drillers, that time should never come, and they’ve spent $55 million (and counting) in campaign contributions and lobbying to ensure it never does.

If the gas drillers successfully pull the severance tax from the budget, Pennsylvania taxpayers are the ones who will land flat on their backs.

PA Liquor Control Board Transfer of Nearly $550 Million to State Coffers in 2014-15 No Fairy Tale

November 9, 2015 - 3:03pm

A new financial report for 2014-15 reveals that the Pennsylvania Liquor Control Board is still a cash cow that delivers more than half a billion dollars annually to commonwealth coffers. Pennsylvania taxpayers and state legislators should remain wary of anyone offering magic beans for this cash cow – an exchange more likely to leave Pennsylvania’s finances in bleaker shape than to produce the payoff magic beans did in the Jack and the Beanstalk fairy tale.

Using the same reporting method as previously (to allows comparison with 2013-14 financial performance), unaudited financial results released by the Pennsylvania Liquor Control Board at the end of October show the agency with a net profit of $132.8 million in 2014-15, an increase of 2.5 percent over the previous year. Assuming a transfer of $80 million to the state treasury out of this profit, and adding in liquor and sales taxes, revenues from the industry to state coffers will total $544.6 million for the year.

Interpreting PLCB financial performance is made more complicated this year because the PLCB applies for the first time a new accounting standard (GASB 68) requiring public entities to show on the books total unfunded pension liabilities accumulated over decades. As school boards and municipalities apply this rule, expect recurring communications that the sky is falling. Consistent with this expectation, when the PLCB’s new report showed $362 million in pension debt for the first time, the Commonwealth Foundation said that “the [PLCB] ended the year more than $238 million in the red.”

In reality, a bookkeeping net loss for the year says nothing about the financial viability of the PLCB long term. In fact, the PLCB reported, net cash generated by operating activities totaled $139.1 million for the fiscal year 2014-15.

Looked at from another angle, the report puts in proper perspective the manageable size of PLCB pension debt: PLCB’s entire accumulated share of pension debt is two-thirds of a single year’s transfers from the PLCB to the General Fund – that is, $362 million is two-thirds of $544.6 million. Paid down over 30 years, PLCB pension debt is a few percent on an annual basis of the income-generating power of the PLCB asset to the state.

What the comparison above shows is that the real issue for state revenues is not pension debt but what privatization will mean for the total revenues transferred on a sustainable basis from the wine and spirits industry to the state: how much of the annual flow of milk from the cash cow will the state lose and how big an upfront sale price will privatization yield? Taxes as well as PLCB profits need to be included in this analysis because once private profit adds additional wholesale and retail markups to price there may be consumer pressure to lower sales and liquor taxes. In addition, under state control 100 percent of sales and liquor taxes are collected. This share will likely decrease with privatization.

Recent research that looks at the total revenues states receive from alcohol distribution, including taxes, found that control states, such as Pennsylvania, raise the most total revenue from the industry. This research is a more reliable guide to the impact of wine and spirits store privatization on state revenues than is a Commonwealth Foundation blog post.

In the context of Pennsylvania’s recent debt downgrades, the red ink we need to be most concerned about is that of the state. And so far, the best evidence suggests that privatization of wine and spirits stores would put Pennsylvania’s budget more in the red over the long term. 

If the Robots Actually Came ... We Could Enjoy Shorter Work Time

November 3, 2015 - 11:18am

There's been a lot of hand-wringing recently about "the robots are coming." They are going to take so many jobs that many people, especially in more vulnerable demographic groups, will end up jobless.

We and our friends in the community of progressive economic think tanks, the Economic Analysis Research Network (EARN), find this technological determinism misguided. Martin Wolf, chief economics commentator at the Financial Times, points out that with equitable distribution of the economic benefits, more robots will mean less work for people -- otherwise known as productivity growth. This productivity growth could pay for higher living standards, a shorter work week or some of both.

What brings this to mind are recent stories in The Atlantic and Fortune on the move by many Swedish businesses to a six-hour work day. These businesses are beginning to choose a future of high productivity growth and shorter work time. Sounds good to us.

A couple of weeks ago, Dean Baker, of the Center for Economic and Policy Research, blogged on the Swedish work-day shift. A year ago, in research for EARN, Baker ran the numbers on the kind of future we could have with different assumptions about income distribution and the rate of productivity growth. Baker's calculations (see chart below) show that, even with today's skewed income distribution, 2 percent productivity growth in 30 years would yield an increase in hourly compensation of 81 percent. This is sufficient to support a 50 percent increase in living standards combined with a one-sixth reduction in annual work hours  – e.g., eight weeks more vacation for someone who works 40 hours per week, 48 weeks a year.



With 2 percent productivity growth and a return to the more equal income distribution of the late 1970s, Americans could enjoy a 50 percent increase in living standards, a six-hour work day -- compatible with caring for school-age children -- plus nearly 10 weeks of additional vacation. With more robots -- i.e., even higher productivity growth -- AND a decent income distribution, the future becomes even more attractive.

The infographic below shows our representative 90-percenter thinking about the additional income she could enjoy and also about the vacation time with children, lifelong education, care-taking for an elderly parent, and freedom from debt that might result.

This infographic brings to mind Samuel Gompers’ famous 1893 quote about what labor wants, delivered not long before manufacturing technology generated a leap forward in productivity: ““We want more schoolhouses and less jails; more books and less arsenals; more learning and less vice; more leisure and less greed; more justice and less revenge; in fact, more of the opportunities to cultivate our better natures…and [make] childhood more happy and bright.”

In other words, technological liberation from more work should be something to celebrate, allowing an easy political dialogue about how to split the bounty.

Sweden is already starting down this road of higher-productivity growth and shorter work time.

When will WE get started here in Pennsylvania and the rest of the United States?

 

 

Economic Policies That Raise Wages, Part II

November 2, 2015 - 2:15pm
Below is the fifth and final excerpt in a series reprinting The State of Working Pennsylvania 2015 report, released by Keystone Research Center on Sept. 2:
Maintain Expansionary Monetary Policy

The Federal Open Market Committee (FOMC) of the Federal Reserve sets a target interest rate that depository institutions (banks) charge one another to borrow funds overnight.[1] This interest rate in turn determines the interest rates that businesses and consumers face when borrowing money – for example, to buy a car or a house.  All else held constant raising the target interest rate slows job growth and lowering the rate increases job growth. The current Federal Funds target rate is between zero and 0.25%. By historical standards this target is low[2] and reflects the judgement of a majority of the Open Market Committee until now that inflation is low and the economy is below full employment and thus requires support to boost employment growth. 

The FOMC is currently considering whether to raise its target for the federal funds rate. The labor market in Pennsylvania as we have demonstrated remains well below full employment. Inflation also remains substantially below normal with consumer prices in Pennsylvania rising just 1.3% in 2014, a figure less than half the average rate of inflation in the in the last 35 years and also below the Fed’s inflation rate target of 2%.[3] Although inflation is low, the substantial excess capacity in the labor market has made the rate of growth in wages even slower.  To raise the Federal Funds target interest rate now would dampen job growth and in turn slow the growth in wages for most workers. Keeping the federal funds target low is the course of action most likely to lead to real wage gains for the majority of Pennsylvania workers.[4]

A Jobs That Pay Action Plan – A Good Jobs Strategy for Pennsylvania

In his inaugural address, Gov. Wolf made “jobs that pay” one of three priorities for his administration (the others being “schools that teach” and “government that works”). To advance that goal, the administration should develop a comprehensive Action Plan that spells out a combination of achievable executive and legislative steps that would achieve more jobs that pay and lift the wages and incomes for the Pennsylvania 99 percent by 10 percent by the year 2018. At one level, this Action Plan would be similar in spirit to U.S. Vice President Joe Biden’s Middle Class Task Force, with an added emphasis on ensuring that the analysis of ways to strengthen the middle class translate into concrete actions that move the needle on wages.

The Jobs That Pay Action Plan should include the implementation of strategic, industry-specific enforcement of labor standards. Traditionally, enforcement of labor standards in the United has been complaint driven (i.e., reactive) and fragmented, with enforcement of each labor standard (wage law, overtime, health and safety, prevailing wage, etc.) done by separate agencies and with little or no communication or coordination across agencies. The Obama Administration and a growing number of states, however, have increasingly shifted to pro-active enforcement of labor standards in specific industries in which violations concentrate. They have also begun to increase communication and coordination between federal and state government – including through data sharing agreements – and across agencies within states. Pennsylvania is behind the curve on these innovations and it should be a best-practice state.

The Jobs That Pay Action Plan should also consider a wide range of other actions. For example, in discussions about raising local minimum wages some observers express concerns about the ability of small businesses to adapt. As long as it is not pre-empted by the state legislature, the state could partner with philanthropy (e.g., in Pittsburgh or Philadelphia) to increase the local minimum wage coupled with delivery of a program of technical assistance to help small employers reorganize to improve efficiency so that they can afford to pay higher wages. A third area for examination should be the “wage boards,” such as the fast food wage board that lifted the wage for fast food workers to $15 per hour in New York state.[5] Are wage boards a policy innovation that could be applied in Pennsylvania, both in sectors such as fast food where the state is not a funder and in sectors such as long-term care, health care more broadly, and child care, where it is?

 

Read more about raising wages and care quality for workers in Pennsylvania nursing homes at http://goo.gl/Im4BZU

As implicit in the policies proposed above, a Jobs That Pay Action Plan should include a sector-specific focus – systematic analysis, sector by sector, of what government can do to create more jobs that pay. The nursing home industry, for example, is powerfully influenced by state government in its role as direct funder of services, indirect funder (e.g., by virtue of means-tested social programs accessed by many nursing home workers because they earn so little, or through funding for training nursing home workers), and regulator. How can each of these roles align in a way that lifts wages, improves the quality of services for consumers, and potentially reduces some costs? (Best-practice nursing homes streamline professional jobs by broadening direct care jobs. Their residents also tend to use less medication.)

Across the board, a comprehensive Jobs That Pay Action Plan would not just improve jobs. It would also improve economic performance – productivity, quality, service, and innovation. The reason is simple: in every sector, there are variations in competitive – or “business” – strategy. Some companies compete by combining sophisticated technology, smart operating practices, and committed, experienced workers who have “good jobs” (which pay higher wages and benefits than typical for the industry).[6] Other companies rely much more heavily on paying workers low wages and benefits. High labor standards and effective enforcement plus technical assistance and smart public investment in training can shift more companies toward good jobs strategies.

Conclusion

Our message to Pennsylvania policymakers this Labor Day is two-fold: first, “do no harm” – enact a sustainable state budget NOW that reinvests in education, communities, and jobs, and avoids a repeat of the economy-sapping austerity budget of 2011.

Second, do some good: enact policies that will lift wages and incomes starting in Pennsylvania – with a minimum wage increase, preferably as a bipartisan sweetener in the final budget deal



[1] To read more about the structure of the FOMC see http://www.federalreserve.gov/monetarypolicy/fomc.htm

[2] See federal funds data maintained by the Federal Reserve Bank of New York https://goo.gl/gruvb1

[3] Figures based on the Consumer Price Index - All Urban Consumers in the Philadelphia-Wilmington-Atlantic City, PA-NJ-DE-MD metropolitan area.

[4] On the particular importance of keeping interest rates low to African-American and minority workers, whose unemployment rates are much higher than white workers, and employment-to-population ratios much lower, see Connie M. Razza, Wall Street, Main Street, and Martin Luther King Jr. Boulevard, Center for Popular Democracy (CPD) and Economic Policy Institute (EPI), March 2015, online at http://goo.gl/m18Hn9. CPD, EPI, Action United Philadelphia, KRC and a variety of other national and state groups are partners on the “Fed Up” campaign which aims to shift Fed priorities toward a stronger focus on job creation and raising wages.

[5] See James Parrott. 2015. "Testimony before the NYS Department of Labor Wage Board Hearing on Increasing the Minimum Wage in the Fast-Food Industry.” Fiscal Policy Institute. http://goo.gl/kuqt0M and David Cooper. 2015. "Testimony before the New York State Department of Labor Wage Board

Hearing on Increasing the Minimum Wage in the Fast-Food Industry." Economic Policy Institute. http://goo.gl/6YKhF5

[6] For compelling examples of “good job strategies” in retail, see Zeynep Ton, The Good Jobs Strategy, New Harvest, 2014.

KRC/PBPC Insider News for the Week Ending Oct. 23, 2015

October 26, 2015 - 11:19am

State House Majority Leader Dave Reed told Patriot-News/Pennlive.com Editorial Page Editor John Micek last week that the next few weeks will be critical in the ongoing state budget negotiations. Leader Reed said there is bipartisan support for more funding for education and a lot of interest in property tax relief. But there isn’t agreement yet on how these should be achieved. "We want to fix the structural deficit. We know you need recurring revenue to do so. But we don't think we need a personal income tax or sales tax [increase] for anything other than property tax [reduction],” he said.

While we’d to love to be convinced otherwise, we at PBPC think the representative’s numbers don’t add up. If we’re right, the legislative majority’s rejection of revenue increases means no significant boost in education funding and a continuing or worsening structural deficit.

In addition, while we appreciate a commitment to more education funding and fixing the structural deficit, we’re nervous that the favored revenue source might be a fire sale on the state’s profitable wine and spirits stores and/or booking all the purported savings from long-term pension changes in the first one to three years. Those moves could actually make the long-term structural deficit worse which would, in turn, doom prospects for sustained progress towards adequate and equitable school funding.

 

House Majority Leader Dave Reed                                      Pennlive.com/Jan Murphy

Meanwhile, Moody’s revised its outlook on Pennsylvania’s general obligation debt from “stable” to “negative,” citing what was then a 107-day budget impasse (now a 117-day impasse). See KRC Executive Director Stephen Herzenberg’s comments to 90.5 WITF on the downgrade. Last week PBPC released Way No. 16 that the Budget Matters: Career & Technical Education. And PBPC Interim Research Director Mark Price wrote a blog post on what Pennsylvania’s budget experience means for other states for the Economic Policy Institute’s Working Economics Blog.

Putting students first … KRC and PBPC signed a letter sent to Gov. Wolf and the legislature last week, from the Campaign for Fair Education Funding, urging them to promptly reach a budget agreement that enacts the funding formula adopted by the state Basic Education Commission. The formula would invest significant new dollars in Pennsylvania’s public schools. PBPC is a member of the campaign.

To $15 and beyond – lifting wages in health care and the broader service sector. Steve Herzenberg testified last Thursday before a Pittsburgh wage review committee on the need to lift health care wages. The committee, established by the Pittsburgh City Council, was inspired by the example of the New York fast food wage board, which used a little-known statutory provision of New York’s minimum wage law to mandate an increase in fast food wages to $15 per hour across the state. While the Pittsburgh committee does not have power to mandate wage increases, it can advance the public case for them.

As Steve explained in his testimony, lifting health care wages would deliver multiple benefits, enabling more families to support themselves, setting a higher standard for other service industries, and slashing turnover while improving health care quality. KRC economists have long argued that lifting wages in “non-mobile” service industries (which have to stay near their customers) is THE answer to inequality – because most low-wage jobs are in such service industries! Whether you lift those wages through (a) area-wide unions, (b) industry-specific wage standards set by wage boards, (c) a much higher minimum wage, or (d) some mix of all three, that is how we can magically make the income distribution much more like that of the 1970s. So hats off to Pittsburgh City Council!

Laboring industriously for labor and industry … Check out what KRC labor economist Mark Price had to say in the Pittsburgh Tribune-Review about Pennsylvania’s September job numbers and the budget impasse. On Friday, Mark was a presenter at the Labor and Industry Workshop at the Pennsylvania State Conference 81st Annual Convention of the NAACP in Washington, Pa.

Last week was National Save for Retirement Week But beware all the hype about how great 401(k)-style plan accounts are for public workers. Steve Herzenberg has written extensively on the subject as Pennsylvania grapples with its own pension crisis. This is a good time to review his Top 10 Facts on SB 1, which would remove future state and school employees from Pennsylvania’s existing defined benefit pension plans and establish for them individual 401(k)-style, defined contribution savings accounts and a supplementary “cash balance” account.

Looking at economic policies that raise wages … The latest bite-sized installment of The State of Working Pennsylvania 2015 landed on the Third and State blog last Thursday. It’s Part One of two parts on what economic policies will raise wages.

Doggedly working … And for a short time on Friday PBPC transformed into the Pennsylvania Beagle and Policy Center when Steve’s dog, and our mascot, Ellie “Policy Wonk” Mae paid us a brief visit just to make sure we were still hard at work on a sunny Friday afternoon. Fortunately, she isn’t a “ruff” taskmaster.

Ellie Mae checking to see if PBPC staff are keeping food in their desks

 

Why the Budget Matters: Way No. 4 -- Pre-Kindergarten Funding

October 22, 2015 - 3:23pm

Pre-K Expansion Would Enhance Educational Opportunity and Economic Growth and Pay for Itself Many Times Over

14,000 more children statewide would gain entrance into pre-kindergarten

Reporter Erica Erwin noted in The Erie Times-News earlier this year, “The push to make quality pre-kindergarten available to all 3- and 4-year-old children in Pennsylvania has the support of someone familiar with a different kind of battle. Senior Judge Michael Dunlavey, a retired two-star general in the U.S. Army Reserve, said access to early childhood education is connected to the nation's ability to protect and defend itself.”  Dunlavey spoke to a gathering of legislators and local business and community leaders in support of Pre-K for PA, a statewide, non-partisan campaign for high-quality pre-kindergarten access for all 3- and 4-year-old children.

Retired military officers and business leaders may not spring to mind as your typical advocates for early-childhood education. But over the past decade, they have become some of the strongest advocates for pre-kindergarten programs geared toward children at risk of later failing school.
 
These civic champions know that programs like Pennsylvania's Pre-K Counts help children stay in school and avoid a life of crime. The payoff is down the line when more young adults join the workforce – or are eligible for military service. Rigorous long-term studies estimate that high quality pre-kindergarten provides a significant return on investment – every dollar spent returns as much as $17 in reduced crime, education and welfare savings as well as higher earnings and increased taxes paid in adulthood.

Gov. Tom Wolf took office this year with a commitment to making publicly funded, high-quality pre-K available to every 3- and 4-year-old child in Pennsylvania. Legislative support for early learning investments also is strong. The bipartisan, bicameral Early Childhood Education Caucus is the largest issue-focused caucus in the General Assembly.

Even so, Pennsylvania’s progress in making smart investments in early childhood education has been too slow. Only one in six three- and four-year-olds has access to high-quality, publicly funded pre-K programs.

Gov. Wolf proposes to increase early childhood education funding by $120 million (88%), with $100 million going to Pre-K Counts. This increase would result in the enrollment of 14,000 more children in programs that help them develop academically and socially prior to entering the regular classroom. (To see an estimate of new pre-K slots in your state House or Senate district, click here.)

The Republican budget would increase Pre-K Counts funding by $25 million, adding only about 3,500 slots (including those created by funding for the Head Start Supplemental Assistance Program. These 3,500 children would account for only about 1 percent of Pennsylvania’s 3- and 4-year olds. To compare the number of high quality, early-childhood slots added in your state House or Senate district under the Republican and Wolf budgets, click here).  Slow expansion of quality pre-school hurts children and employers and reduces economic growth in a job market finally generating more opportunities for parents.

First grade teacher Lindsay Kiefer said, “Kindergarten teachers have a really tough time if students come in at varying levels of prior experience. Kids that come in with a pre-K experience are ready to take the next step. I had a little girl in my class who had the privilege of a great pre-kindergarten experience. She started the year with all of the basic skills and more importantly the confidence to tackle problems. With that great head start going into second grade, she was ready to dive in head first to grade-level topics and skills."

Newspaper editors, civic leaders and Pennsylvanians from across the state have spoken out in favor of investment in quality pre-school programs.

For example, Snyder County District Attorney Michael Piecuch noted: “In Snyder County, 86 percent of 3- and 4-year-olds lack access to high-quality pre-K each year. In Northumberland County, 80 percent lack this access and in Union County, it’s 78 percent … I hope that the final negotiated budget will include more funding to expand access to high-quality pre-K, not only for its economic benefits but as part of a proven crime prevention strategy.” 

Parent Jennifer Cebrick wrote, “Lawmakers and Gov. Wolf need to work together to create a budget that expands access to high-quality pre-K as much as possible so more children can benefit the way my kids did.” 
 
Kiwanis leader Laura Katrenicz noted that, “Pre-K programs benefit not only the child, but also the community. High-quality pre-K reduces crime, supports economic development and growth, and saves taxpayer money that can be reallocated to other community needs.”

As the editorial board of the Pittsburgh Post-Gazette warned: “Only 31 percent of 4-year-olds [in Pennsylvania] attend preschool, most through public initiatives such as Head Start … What they don’t spend on early education today could be wasted on prisons tomorrow.”

For more ways the budget matters visit Why the Budget Matters: Let Me County the Ways.

Economic Policies That Raise Wages

October 21, 2015 - 3:08pm

Below is the fourth in a series of excerpts from The State of Working Pennsylvania 2015 report, released by Keystone Research Center on Sept. 2, which will appear on Third and State in the coming weeks:

Raise the Minimum Wage

The most direct route to raising wages for low-wage workers is to raise the minimum wage. Federally the campaign to raise the minimum wage remains blocked by a Republican majority in the U.S. House and Senate.

Similarly here in Pennsylvania the leadership of the Republican majorities in both chambers of the General Assembly have yet to permit a vote on any one of several bills that would raise the minimum wage from $7.25 to between $8.75 and $15 per hour. So far this year only the Senate’s Labor and Industry Committee chaired by Lisa Baker (R) and minority chair Christine Tartaglione (D) has even held a hearing on the minimum wage. None of the minimum-wage bills have been voted out of that committee and considered by the full Senate. 

Although Gov. Wolf included his support for a higher minimum wage in his initial state budget proposal he has not made passage of a higher minimum wage a condition of his final compromise with the Republican leadership over the state budget. 

Continuing delay of a state minimum-wage increase is costly to millions of Pennsylvania workers. Raising the minimum wage to $10.10 would raise the wages of 1.2 million workers and boost total wages by $1.8 billion.

To examine the number of workers in your county that would see their wages rise if the minimum wage were raised go to httpgoo.gl/ORvzvJ

Currently 29 states including the District of Columbia have a minimum wage higher than $7.25.  Across the country in the last year, there has been a growing movement to increase the minimum wage. For example, the City of Los Angeles adopting a proposal to raise the minimum wage to $15 per hour and most recently the state of New York adopted a minimum wage for fast food workers of $15 per hour.  

There is broad public support[1] in Pennsylvania for a higher minimum wage. Moreover, Republicans have introduced their own legislation to raise the minimum wage. All that remains is for leadership in both chambers to allow a vote.

Overtime Pay

Most blue-collar workers are entitled to be paid 1.5 times their regular pay rate for each hour of work per week beyond 40 hours.  Overtime eligibility for workers paid a salary depends on how much they are paid and the nature of their job duties.  Currently, salaried employees earning less than $455 per week – $23,660 per year – are automatically eligible for overtime.[2] The U.S. Labor Department has proposed a rule change which would raise this threshold to $933 per week.[3]  This change would benefit 493,000 or 24.6% of salaried workers in Pennsylvania.[4]

The U.S. Labor Department published this rule change as a Notice of Proposed Rulemaking in the Federal Register on July 6 of this year and the period for public comment closes on Sept 4th.  Once public comments have been collected and analyzed by the U.S. Labor Department the agency will decided whether to modify the current rule as proposed a process that will take another 6 to 10 months.  

Like a minimum-wage increase, increasing the number of workers with a right to overtime will help boost the pay of thousands of Pennsylvania workers.  Unlike a minimum-wage increase the salaried workers that would benefit have earnings that place them in the broad middle of the wage distribution, between $12 and $24 dollars an hour.[5]

Earned Leave

Another important dimension of pay is the right to earned leave when a worker gets sick. Access to earned sick leave is much less common among low-wage workers.[6] The Institute for Women’s Policy Research estimates that in total 1.8 million Pennsylvania workers do not have access to paid leave.[7] 

Since that estimate was released, the City of Philadelphia enacted an ordinance entitling workers in the city of Philadelphia to one hour of earned leave for every 40 hours of work.[8]  Pittsburgh followed up this year with its own ordinance entitling worker in the city to one hour of paid leave for every 35 hours of work.[9]

At the state level, Sen. Vincent Hughes (D) has introduced legislation that would entitle all workers in Pennsylvania to accrue one hour of paid leave for every 30 hours of work.[10] A statewide ordinance that establishes a minimum amount of earned leave would benefit well over a million workers (i.e., 1.8 million minus workers already covered by the Pittsburgh and Philadelphia ordinances).




[1] Two thirds of registered Pennsylvania voters support raising the minimum wage to $10.10 per hour. http://www.fandm.edu/uploads/files/943825657393157904-franklin-marshall-...

[2] Salaried workers earning more than $455 a week are exempted from the right to receive overtime if their job duties fall into one of three categories: professionals, administrators, and executives.

[3] This is the 40th percentile of earnings for full-time salaried workers in 2013 (expressed in 2014 dollars).

[4] Lawrence Mishel and Ross Eisenbrey 2015. “Raising the overtime threshold would directly benefit 13.5 million workers: Here is a breakdown of who they are”, Economic Policy Institute http://www.epi.org/publication/breakdownovertimebeneficiaries/

[5] The workers affected have earnings that place them somewhere between the 30th and 70th percentiles of wage earners.

[6] See for example page 3 of Institute for Women’s Policy Research. 2015 “Access to Paid Sick time in Pittsburgh, Pennsylvania”

[7] Institute for Women’s Policy Research. 2010. “Fact Sheet: Access to Paid Sick Days in the States, 2010” http://www.iwpr.org/publications/pubs/access-to-paid-sick-days-in-the-st...

[8] With the maximum accrual set to 40 hours for workers employed in establishments with 10 or more employees, workers in firms with less than 10 workers are entitled to up to 40 hours of unpaid leave.

[9] With the maximum accrual set to 40 hours for workers employed in establishments with 15 or more employees, workers in firms with less than 15 workers are entitled to up to 24 hours of paid leave starting after May 13 2016. 

[10] A most under SB 221 a worker could accrue 56 hours or seven days of paid sick leave in a year.