Can American Manufacturing Afford a Raise?

How will Obama's plans to extend overtime protection affect economic growth?

Mnet 120879 Melissa

In a recent blog post, A Hard Day’s Work deserves a Fair Day’s Pay, Obama explains his plans to extend overtime protection to nearly 5 million workers in 2016, covering all salaried workers making up to about $50,400 next year. “That's good for workers who want fair pay, and it's good for business owners who are already paying their employees what they deserve,” he says. “Since those who are doing right by their employees are undercut by competitors who aren't.”

One business owner who is being undercut by his competitors recently wrote to me in response to my blog, The Weak Dollar, Wage War & Why Made in America is Still Better. However, the new rule (with the purpose of protecting business owners such as himself) may force him to close his doors.

Read more: 3D Printing & the Future of Manufacturing

“We do not know what we are going to do regarding our factory’s future in the U.S.,” he explains. “My competitors are moving to outside of the country with labor rates low and property taxes being non-existent.”

The company employs 17 salaried employees making about $32,000 a year. “We work over 200 people and growth this YTD is 27%, but we may be right at the end of being able to even stay open,” explains the CEO.

One option, that many of his competitors have already taken, is to move operations out of the United States.

“We just had one of our competitors open a new, modern plant in Juarez, Mexico,” he explains. Others have been operating out of Mexico for years, but with small operations in the U.S. “I really do not see how it is possible for us to not make the move to Mexico,” he adds.

The move would mark the end of the company’s American owned and operated business.

Another trend the CEO comments on is competitors using deceptive marketing by operating small plants in the U.S., but manufacturing elsewhere on the cheap. “They build thousands of a commodity product, stick in a container, and ship it to their plant in the U.S.,” he explains. “Now it appears it is being built in the U.S. It is all getting out of hand.”

The CEO also adds that property taxes “are a killer.”

A hearing, "Reviewing the Rules and Regulations Implementing Federal Wage and Hour Standards," which occurred on June 10, brought together many attendees expressing similar concerns, including those surrounding complicated regulations, more litigation, and limited workplace flexibility.

During the meeting, the Subcommittee on Workforce Protections Chairman, Tim Walberg, explained, “Thanks to an administration notorious for overreaching and governing through executive fiat, I share many of those same concerns … it is my hope the department will heed these concerns and ultimately put forward a proposal that encourages – rather than stifles – productivity, personal opportunity, and economic growth.”

It is estimated that the change would give between five and ten million workers a raise, and while it is hard to argue a fair days pay, who is going to pick up the tab?

What are your thoughts? Will the new rule encourage productivity and economic growth, or stifle it?

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