How might overtime change affect middle class? Look at colleges.

The Obama administration's new overtime rule is intended to help the middle class. That could play out in a big way in higher education, for example, where researchers work long hours for $43,000. 

In Cordelia Running’s view, she had it better than most.

After graduating with a PhD in food science and nutrition from Purdue University in 2015, Ms. Running wrapped up a one-year postdoctoral research program at Penn State earlier this spring. Purdue has hired her as an assistant professor for the coming year.

“My PI [principal investigator, or the head of the lab she worked in] was very flexible,” she says. “Some would be enraged if you didn’t spend 80 hours a week in the lab, but mine was a more reasonable human being.”

Still, she was typically the first one in and the last one out, and working on weekends was the norm. Like many academics, her schedule varied wildly based on the projects she was working on, but 60-hour workweeks “weren’t uncommon.” Running’s annual salary, set through a federal grant from the National Institutes of Health, was $42,800, a typical starting salary for academic post docs in science fields. 

“I mean, we all have PhDs,” she says. “$40,000 for someone who just spent eight extra years in college…no, I don’t think that’s even, but that’s the rule of academia.”

That rule, however, is about to change.

On Wednesday, the Obama administration unveiled a long-awaited set of changes regulating overtime pay. The changes will extend overtime rights to a wider range of workers – especially in fields such as retail and hospitality. Experts have said the overtime rule can have as big an impact on the middle class as minimum wage increases can for lower-income workers.

The overtime rule “goes to the heart of the defining issue of our time, that is restoring and expanding access to the middle class,” Vice President Joe Biden told reporters Tuesday.

Previously, the threshold was $23,660, or about $455 a week. As of Dec. 1, it will double to $47,476 a year, covering an estimated 33 percent of today’s salaried workforce, according to the National Employment Law Project. In another change, for the first time, incentives and bonuses can count toward 10 percent of the new salary level. Going forward, the Department of Labor will index the threshold and adjust it every three years.

The administration says the change will impact some 4.2 million Americans in its first year, many of them in low-level retail management and administrative jobs. But it will also provide some relief to tens of thousands of academic researchers like Running.

“Post docs average about $43,000 a year nationwide,” says Ross Eisenbray, an economist and vice president at the Economic Policy Institute in Washington. “If they work 60 hours a week, they effectively make $15 an hour. That’s what fast food workers are asking for, and these are some of the best-educated Americans.”

“Universities take their work, use it for marketing and grants,” he continues. “A whole industry depends on these people, and they are being exploited.”

But while the change is being celebrated in many corners of the academic world, university administrators have been less enthusiastic. They argue the pay raise is too abrupt and unwieldy, potentially costing large university systems millions in extra payroll costs. They also say it could have unforeseen negative consequences including lost jobs and higher tuition.  What’s more, they say (and even proponents of the change agree), academic research doesn’t adhere to a traditional 9 to 5 structure, making keeping track of post doc hours an all but impossible task. 

Higher learning, lower pay

The National Science Foundation (NSF) estimates there are between 60,000 and 100,000 postdocs working across all academic fields, the majority of them in life sciences. Boston, a hub of biomedical research, has an estimated 8,000 working post docs. Unlike Running, many have research positions that run several years after completing graduate school.

Anke Schennink, who has a PhD in animal science, has been doing postdoctoral research for 4-1/2 years across two positions at the University of California at Davis. She’s the president of a union that represents about 6,000 post docs in the UC system, and says that many of its members struggle to afford basic living in high-cost areas like Berkeley, San Francisco, and Los Angeles.

“It really has an impact,” she says “It contributes to a lack of women in STEM because few of them can afford childcare on these salaries. Also, a significant proportion of post docs are international, which means you’re on a work visa, and in many cases your spouse cannot work.”

By and large, the research community agrees. In 2014, the National Academies of Science and Engineering, along with the Institute of Medicine, released a report recommending that postdocs working on federally funded biomedical research should make at least $50,000 a year, more in areas with high costs of living. While the new overtime rule – which was scaled back slightly from the $50,440 proposed last year – doesn't meet that threshold, it puts postdocs far closer than before.

“We are losing great postdocs to other careers,” Schennink says, and it’s not hard to see why. Recent PhD graduates with health and engineering fields who forgo post doc programs and move into other areas of the workforce have an average starting salary of $76,000, according to 2010 government data.

Too costly?

Administrators, however, contend the sudden raise in salaries for postdocs and other eligible academic workers, including athletic coaches, librarians, admissions officers, and IT workers, will be an abrupt financial burden. Employers have until December to comply with the new regulations. 

“Where do they think that money is going to come from?” asks David Armstrong, president of Thomas More College in Crestview Hills, Ky. “For someone to say that hundreds of your employees are getting double pay by fiat, that’s tough. We’re a small liberal arts school. Let’s say it’s 10 employees, we won’t have the budget. I’ll have to increase tuition, and we can’t have that.”

In Florida, the change will affect approximately 6,500 employees and cost the state university system $62 million, according to calculations from Florida International University’s HR department. Indiana University estimates it will spend between $5 million and $15 million in extra labor costs, depending on how it decides to comply – either by raising salaries, limiting workers to 40 hours a week, or some combination of both.

Mr. Armstrong argues the rule change could lead to job loss, as well as a dearth of entry-level positions vital for getting people their start in the academic world. “Those jobs create a lot of opportunities for young people.” He says he got his start making $20,000 a year, upon graduating law school in 1989, working a patchwork of low-level jobs including residence hall director and assistant football coach. “If I have to pay an entry-level person $55,000, I’m not going to hire one.”

 It’s a worry echoed in research circles as well. The National Postdoctoral Association favors higher salaries, but said in a comment submitted to the Labor Department that it feared researchers would cut the number of positions or re-classify post docs so they wouldn’t qualify.

The Obama administration’s stance is that the overtime threshold has become too low as inflation has increased, and that a substantial bump is necessary to simply catch up. The current overtime threshold is below the poverty line for a family of four.  In 1975, 62 percent of salaried workers were eligible for overtime pay. Today, it’s 7 percent. The new overtime rules would cover about 40 percent of the workforce.

Schennink, the union president, says warnings about lost jobs are “doomsday scenarios,” because post docs bring valuable grants, prestige, and innovation to universities. Researchers bring the UC system an estimated $6 billion in research grants every year – a pay increase for the system’s post docs would make up a small fraction of that.

What’s more, she points out, hiring levels weren’t affected when UC post docs unionized and got pay raises in 2010, and recent analysis suggests that post doc openings nationwide have only increased along with salaries.

“If they’re having trouble, they need to reexamine their priorities,” says Eisenbray, the EPI economist.  “They have no problem paying administrators and football coaches six and seven figure salaries. Why are we paying an assistant vice president $300,000 a year and a cancer researcher $15 an hour? They ought to be embarrassed to make that argument.”

Other concerns

Even those in favor of post docs getting a raise say it won’t be a perfect transition. People on both sides of the issue have argued tracking research hours would be a complicated waste of time. “ I don’t even know how you’d do it,” Running, the nutrition scientist, muses. “Do you count sitting on a plane with your laptop open? Do you count writing up a paper at home? You never really ‘leave’ research, so that might be more confusing than it’s worth.”

“It would be an administrative nightmare,” Schennink agrees.

Dale Belman, a professor of human resources and economics at Michigan State University, predicts grant-funding institutions like the Department of Energy will simply raise stipends past the overtime limit to avoid that issue. “I expect the effects will be modest at best,” he says.

Running also worries that the rules themselves don’t go far enough. The overtime law has a teaching exemption, which means that adjunct professors who work long hours for low pay and little stability are not protected. Her husband is one of them. “I don’t see the value of protecting some people and not others,” she says.

Still, Schennink says it’s a big step forward for a group that keeps the engine of academia humming. “If we can help postdocs afford child care and rent and food, that boosts productivity,” she says. “It will lead to better research.”