Middle class economics means that a hard day’s work should lead to a fair day’s pay. For much of the past century, a cornerstone of that promise has been the 40-hour workweek. But for decades, industry lobbyists have bottled up efforts to keep these rules up to date, leaving millions of Americans working long hours, and taking them away from their families without the overtime pay that they have earned. Business owners who treat their employees fairly are being undercut by competitors who don’t.
Today, President Obama announced that the Department of Labor will propose extending overtime pay to nearly 5 million workers. The proposal would guarantee overtime pay to most salaried workers earning less than an estimated $50,440 next year. The number of workers in each state who would be affected by this proposal can be found here.
The salary threshold guarantees overtime for most salaried workers who fall below it, but it is eroded by inflation every year. It has only been updated once since the 1970s, when the Bush Administration published a weak rule with the strong support of industry. Today, the salary threshold remains at $23,660 ($455 per week), which is below the poverty threshold for a family of four, and only 8 percent of full-time salaried workers fall below it.
President Obama directed the Secretary of Labor to update regulations relating to who qualifies for overtime pay so that they once again reflect the intent of the Fair Labor Standards Act, and to simplify the rules so they’re easier for workers and businesses to understand and apply. Following months of extensive consultations with employers, workers, unions, and other stakeholders, the Department of Labor developed a proposal that would:
Overtime Pay Has Eroded, Failing Millions of Workers
For much of the 20th century, most Americans enjoyed overtime pay. Since 1938, the Fair Labor Standards Act has required businesses to pay not less than a minimum wage for all hours worked and time-and-a-half for any hours worked in excess of 40 hours per week. These rules apply to most hourly and salaried workers, with exceptions including one for executive, administrative, and professional workers. In 1975, 62 percent of full-time salaried workers, including a majority of college graduates, were eligible for overtime pay.
But today, far fewer workers qualify for overtime pay. The exception for executive, administrative, and professional employees has grown so large that a large majority of salaried workers are denied overtime. The salary threshold, which for most salaried workers determines whether they are guaranteed overtime or not, has been changed only twice in the last 40 years and now covers far fewer workers due to inflation. Today, the salary threshold remains at $23,660 ($455 per week), which is below the poverty threshold for a family of four, and only 8 percent of full-time salaried workers fall below it. Workers above this level may be denied overtime even if they spend only a small share of their time on professional, executive, or administrative activities. For example, a convenience store manager, fast food assistant manager, or office worker may be expected to work 50 or 60 hours a week or more, making barely enough to keep a family out of poverty, and not receiving a dime of overtime pay. For some of these employees, not receiving overtime pay means that they are not even receiving the minimum wage when all of their hours of overtime are taken into account.
This proposed rule will help promote higher take-home pay and allow workers to better balance their work and family obligations. In so doing, it will help shore up the middle class and provide an easier pathway for those aspiring to share in the standard of living it affords.
Building on Additional Efforts to Grow the Middle Class
Modernizing our outdated overtime rules is just one piece of the President’s plan to support America’s workers and grow the middle class. The President believes that all Americans should have the opportunity to succeed in our global economy and all working families should be able to afford the cornerstones of economic security. Middle-out economics has helped to make America stronger over the past six years, with our businesses creating 12.6 million new jobs over 63 straight months of job growth. President Obama is pursuing policies that will ensure a growing economy— one with hard work, higher wages, higher incomes, fairer pay for women, workplace flexibility for parents, affordable health insurance and adequate retirement benefits.
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