for-profit colleges that with will require colleges to do a better job preparing students for the workforce or risk losing federal student an aid. >> ed you hayouthis is the "ins" >> i'm ray suarez.

since the economy shed millions of jobs, many workers couldn't find new ones for a long time and a striking number of those who did get back to work got reemployed at lower salaries, and the oversupply of labor put a damper for demands of higher wages were too many people making in money. too many people making too little, and people who ran businesses selling goods and services to every day americans laying more people off because so many of their customers had so little money to spend. lily president obama has been looking for ways within his executive power to wage workers wageraiseworkers' wages. he's requiring those who work for the federal government to wage their minimum wage to $10.10. now he's proposing that many

more workers be paid time and a half, over time how long pay for working more than 40 hours a week. the costs and the benefits of raising the pay for low-wage workers this thym time on "insie story." >> reporter: president obama's efforts is to reform over time rules may come down to a. over who is a supervisor. >> i'm directing to restore the common sense principle of over time. if you go over and beyond to help your employer and your economy succeed, then you should share a little bit in that success. >> reporter: today's law exempts anyone making around $24,000 or more from guaranteed over time pay if they spend any time supervising workers. >> unfortunately today millions of americans are not getting the extra pay that they deserve. that's because an exception that was originally meant for high-paid white-collar employees

now covers workers earning as little as $23,660 a year. it doesn't matter if it's physical work like stocking shelves or working 50-60 hours a week, your employer does not have to pay you an extra dime 2347 he has the authority to reform rules without going through congress. today only 12% of salaried workers qualify for guaranteed over time compared to 65% in 1975. over time is guaranteed through the air labor standards act of 1938. established as a way to regulate salaries. the act was meant to regulate white color salaries. separating those who were eligible from mandatory overtime from those who work in administrative, professional, executive positions. in 2004

the labor department adjusted those who were working over time time. the president wants to bring the law in line with today's workplace but some businesses say they'll suffer if new overtime regulations go into affect. >> it means renegotiating the salaries for our staff. we only have this much of a bucket of money. it's going to go this far. >> reporter: other credits say it's overregulation and will backfire. >> i think you'll see a lot of people limiting over time as much as possible. >> reporter: states like new york and california have already raised their over time salary thresholds to more than $600 a week. in both states mcdonald res astronaut works filed lawsuit against the company saying their stores denied them over time pay. the company said it should not be liable for its franchises.

thursday's order is the latest move by the president using executive power going around a dead-locked congress. it could take the labor department more than a year to rewrite the law. last month president obama ordered a race i federal raise d began a retirement account called myra. j what is the down stream effect for workers who don't currently get it? what is the down stream affect of raising the wages of the lowest age workers. will goods and services cost you more? if if you make something just over the minimum wage. operating within this narrow framework an illustration of how little power the president has in this area or is willing to

use. raising workers' pay is the "inside story." we begin the program with i cecilia, policy adviser to president obama and director of policy council. thank you for joining us. >> thank you for having me. >> what is the thinking behind this policy. if you do this, then what? >> reporter: then hopefully workers will be paid fairly for a hard day's work. what the president notice and hear from workers every day is that people are working harder to get by just to get ahead. we see people at to the top earning more. an people at the middle and bottom just barely afloat. and the president is going to make sure that this country treats fairly and that you will have a successful life in the middle class. he's fighting for the minimum wage and yesterday he directed

the secretary of late to update the labor. making sure that an honest's day work gets a fair wage. >> do you have back of the envelope calculations of how many people this might potentially effect? and how much money this might mean in their paychecks? >> we know that it will effect millions of workers, and we know that there are workers every year who lose over time coverage because the rate was set in 2004, and that rate doesn't change every year. yet the cost of living and other things do change. we know that workers lose over time coverage h every year. what's going to happen now is that the department of labor is going to start the leg tore process. they're going to consult with businesses like you spoke with. they're going to make sure that they under the impact of the economy before they set what the

next set will be. >> if you're sitting with somebody else in the country and you're wondering how can the president tell me how much to pay my workers and under what terms, what is the legal authorization for president obama to direct the second to move the way he's going to? >> well, the fair labor standards act passed in the 1930's is the authority the department of labor used to direct over time pay. we have a situation where the system is outdated and the level is set at $24,000. anyone over that level is not required to be paid over time. those working in grocery stores stocking shelves, they ca if the

scheduling people they can be classified as an executive, and they don't have to be paid over time. we want to make sure that a worker working 50 hours a weekends up earning less than minimum wage because the employer is not paying them over time. >> employers having to compensate for having to pay these extra hours of work. >> we think there will be a couple of inpass inpass, and thl be companies who will pay their workers: it will either be a good thing. either workers will be paid more or more works will come out. >> how long will this take? >> it's important to make sure

that we get it right, that we set the level that is fair for workers an fair for businesses, and all of this has the impact of making our economy a little bit mayor. it will make our commerce stronger. i saw secretary perez when h whe president signed this order, and he's excited to get working and to make sure that we do this right and do it expeditiously. >> we talked briefly about the number of employees and the impact it could have on scheduling and so on. but what about prices? this money has to come from somewhere? >> it does, but what we've founder respecfoundwith respecte minimum wage is that you end up with a more productive workforce when you're treating people well. when people feel like they're being treated fairly and

compensated for a hard day's work they're loyal for their companies, and ultimately that's better for the economy. so the president has standing behind him when he signed this order workers who were effected by over time for whom it makes a vital difference for their families, and employers who believe this is a right way to grow a healthy business and healthy economy. >> director of the domestic policy council, great to have you with us. >> thank you so much. >> when we return we'll dive further in the issue of over time pay an and low wage worker. stay with us.

>> welcome back to inside story. i'm ray suarez. we're talking about one of president obama's efforts to address income inequality in this country. in this case changing the rules governing pay and overtime work. for a further understanding of the issue we're joined by chief

economist for the afl/cio, and laurie sanders, policy analyst as the r street institute. you just heard from the president's chief economic policy the administration's rationale for doing this. what do you make of it? >> i should laud the pros for tackling economic inequality, but in this opinion this is not the right way to go. there are many things we can do to increase the funds going to workers instead of having money going to people who are living at the top. this is just not the right way to go. >> she pointed out one effect is simply create more jobs. if you have to pay for that extra labor it's cheap for pay someone a straight 40 than 20 hours of over time or roughly similar. but you have another person on hand to do that much more work. there's almost a possibility of

down stream effects. are they more to be feared than the prospect of people having more money in their pocket? >> i think the effects are more to be feared. we're in a really tight labor market. there are so many people searching for work and making work more expensive is just not the way to go. sure, some people will end up with more money in their pockets but they'll look for ways to replace lower wage workers. maybe we'll have more mcdonald's ordering from an ipad rather than cashier using that to get rid of the extra labor cost. maybe we should hire another supervisor so we're not payingover time. i don't think it's fair to say that they're definitely going to be hiring additional people. >> bill, what do you make of what cecilia had to say? >> i think she had all the right notes. this is a labor law which has been in place since the 19 30's. this would effect front line

workers and at that time they were in goods producing area, manufacturing, linemen, things that lend itself to hourly work, but we've transformed. many works who previously just sort of out of culture and habit were paid on a salary basis they are now the front line workers but they are low paid workers. they are not the workers we thought of when the regulation was put in place. it would be lawyers, doctors or high paid professionals who don't do something that really lends itself to an how long concept. part of this is to update the kind of workforce that we have. when the minimum wage went up the department of labor used to go through and clean the whole set of regulations, including what is a supervisor, and where would you think their pay ought to be. that was done you reinly unti rl

1975. i think if you told somebody, i'm the supervisor, and they say what are you paid? and they say $27,000, they'll say i don't think you're the supervisor. >> are too many classified as supervisors? >> i think so. they are not really supervisors but more equal than others. so take someone who supervises workers, maids at a hotel. their pay tends to be around $27,000, but they end up working a lot of overpeople because they have small staff. they are on salary, and so rather than being able to call in one of their workers, they just have to work longer hours. so they really aren't

supervisors. they're just more equal. >> lori, does that ability to differentiate between one worker and another basically give the employer the ability, the right, even, to extract more hours of labor out of someone for the same price? >> i don't think that it's quite as cut and dry as we're making it out. a supervisor has additional responsibilities, and the reason that the supervisor ends up working more is because once again there is a cap on how much labor they can pay for and then demand the supervisor get paid more through this type of overtime regulation is going to hurt hours for everybody else. when the supervisor does work more they have additional responsibility, things like scheduling, thinking about the management process and how to run the department efficiently, and so there is additional responsibility which makes them a salaried worker. >> but when they created the regulations that governed this

part of labor law, they defined it in a way that it is so loose if you spend a small amount of your 40-50 hours on the job doing those supervisory tasks you're classified as a supervisor. you're no longer hourly. you're made salaried. you could work limitless hours. >> you could certainly tighten the standards. that's not a bad thing. the bad thing is raising the 450-dollar limit to $900. that's a huge range so i'm sure we'll end up on the lower side of that, but demanding people making up to that much money get paid more will hurt people's hours. >> did this law create an economic incentive for bosses to classify more workers as supervisors? >> i think because we let the cap deteriorate through

inflation it has created that vacuum. everyone wonders how can productivity get back up, producing as much as we were but we're not hiring more workers. part of the reason is that we're hiring a higher share of the workers who are salaried. the economy has changed. they're not in the goods producing, they're in the service sector. you can make them work as many hours you wish. you just make people work longer. so i think if we do 'do this part of the response will be that yes, when the economy picks up and there is more business that business is going to hire more workers rather than make workers work longer hours? >> what happens if we think of the economy in almost mechanical terms. what do you expect to see happen? >> what i would except to see

happen is somewhat as predicted. what would happen if we raise the minimum wage, you'll see a decline in the workforce. it may work out over time as business picks up but it seems highly unlikely that business also pick up if we have another additional lot. >> of 500,000 workers laid off as we set the limit and study the effects of that limit. that keeps businesses from picking up. it keeps people unemployed and out of the business force and it makes it harder. >> if i was making $600 a week at a job in a service industry, and now my boss wants me to spend an extra two hours at the end of the shift doing supervisory duties. i've done food service and prep, but now at the end of the shift i'm making sure that the shelves are stocked.

in a different era that would have cost the boss money. roughly another 45 a day or $200 a week. that's a lot of money for people making $200 a week. >> where is that coming from? we'll just have--it will reshuffle the way the labor market is working but that's only fair to the people who get to keep their jobs. >> reporter: taking a short break right now when we return we'll talk about the various ways that this has become a national debate. would we even be having this discussion if the economy was going great guns? stay with us. this is "inside story." ♪

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>> welcome back to inside story. i'm ray suarez. we've been talking about workers, over time pay rules and the changes the white house is

now seeking. william, would we even be having a presidential announcement of a new initiative, having an argument whether workers should be paid mortar working more if this economy was producing enough jobs? i don't recall this being a problem when labor demand was high and when the job market was tight. >> well, i think it was a problem back then, too. remember, we did raise the minimum wage during the 1990's twice. but we have to address this de-classification of workers, this loseness in the low-wage labor market in order to have a more robust recovery and prevent the kind of down turn that we saw. this is a step in the right direction to clean up what had been turned into a mess when you look at the way that things work in the low-wage labor mark mark.

even when we're not at full employment we need to find ways to protect wages. gdp per capita has gotten back to its peak level from before. private sector employment next month will be back at peak level. but workers are not feeling they're back, and part that have is because we've allowed these rules to deteriorate. >> you mentioned earlier that a lot more new money i understand up in the hands of capitol than of labor, but productivity keeps going up, and a new there are of profit or earning ends up in the top two-fifths of the wage skill rather than the bottom. how do you change that? if not what the has just asked for, which you say is not the best idea, what rules are available? >> there are things we can do that would be exciting, creative and that would help create more opportunity for the american

worker. we could increase--i'm a big fan of federal wage subsidy. if we feel that people are not being paid enough, we should encourage businesses to hire people, if we think they're not being paid enough then pad it with a federal subsidy. we could increase apprenticeship programs that allows workers to leverage more power and say i'm a more powerful employee to you and i can demand a higher wage for nap there was a bill introduced in the house that would give subsidies to move to an area where the labor market is a bit tighter. if your work is not valued in georgia, i'm picking a random state because that's why i'm from, but if you think you can pick more money in north dakota where we see wages going up and

up, we'll help you move there because that's a better allocation of the workforce. there are things you can do that don't put the burden on businesses that encourage people to work and let's hire people who can work and make sure that workers have additional power. >> we're talking about supervisors. they don't need more training. these are the best workers at the firm. training is not their problems. if we want to give workers more power, we create the union. that's traditionally how we bargain for larger wage. this is tied and trued. america grew faster, more robust and healthy balanced growth because we maintain the value of the minimum wage. we updated our overtime rules and took the high road path. this low road path that has been on, deunionizing, under cutting the wage through lowering the

minimum wage. not keeping up on over time regulation has allowed the disconnect of the productivity of workers to rouge gap of pay in the united states, this is one step to return us to some sort of normalcy. >> aren't supervisors rewarded for keeping wages low and productivity high. >> certainly your goal is to spread your workforce so you stay on payroll. i've worked in minimum wage jobs, i remember watching my supervisor sit there and say this is how much payroll we have for this week. it's christmastime. we have to stock those shelves. this is how i'm going to figure out how to make this work. i'm going to put these people on it at this time because they're most productive. then to meet your payroll hours and keep your people on staff rather than thinking about

letting people go. there are constraints that they need to work sunday. >> this brings us to thi the enf this edition of insid "inside s" from washington, i'm ray suarez. school. >> it's important enough to remind all of us that everybody has to be in the game. there are 57 million children around the world who don't get to go to school. and many of them are girls. >> ttys first major role for the australian prime minister since leaving politics. i spoke to her about being the first woman who has led australia as prime minister.