Restore Overtime Pay: For Fairness, For Families, For Freedom
By Katherine McFate, Center for Effective Government
In 1975, almost two thirds of all American workers were covered by overtime rules. After a person worked 40 hours a week, the law required her employer to pay “time and half” in wages. This made the boss think hard about demanding long work hours and it meant workers received financial compensation (50% more an hour at their regular pay) when they were asked to take time away from family or leisure time. Anyone who wasn’t a boss – “an executive, administrator, or supervisor” – and who earned a salary of less than $52,000 in today’s dollars was eligible to receive overtime.
Today, just 8 percent of working people are guaranteed overtime – only people who earn less than $23,660 a year or $455 a week are now guaranteed overtime. This is less than the federal poverty line for a family of four.
Between 1975 and 2004, the number of working people eligible for overtime fell dramatically for two reasons. First, after 1975, Department of Labor officials failed to adjust the overtime income eligibility level for the cost of living, so as wages and salaries increased with living expenses, the income threshold for overtime feel behind. If policymakers had “indexed” the overtime threshold to the cost of living (like we do with Social Security benefits), many more people would be eligible for overtime. Second, employers started classifying low-paid employees as “managers and supervisors” and giving them a salary instead of an hourly wage, to avoid the requirement to pay overtime.
Unpaid overtime is legalized wage theft. When low-paid salaried workers are required to work long hours without overtime, they can even end up working for less than the minimum wage. For example, an assistant manager in restaurants or retail establishment paid a salary of $27,000 a year who is routinely asked to work 60 hours weeks is actually working for just $9.00 an hour.
A new Department of Labor rule will make 15 million workers eligible for overtime pay.
The Department of Labor has proposed a rule to adjust the income level at which a worker is eligible for overtime to $50,444 a year or $970 a week. Regardless of job title, anyone earning less than $50,444 a year would earn their regular hourly wage and 50% more for every hour they work over 40 hours a week. This rule approximately restores the overtime pay threshold to its value in 1975, adjusted for the cost of living.
Under the new rule, 5 million new workers would automatically be guaranteed “time and half” pay after working 40 hours a week. The working people most likely to benefit? Women, people under 35 years old, and people of color. Many are parents so the biggest beneficiaries of the overtime rule may be the millions of children who have parents who will now have more time to spend with them or more money to support them. Everybody wins.
Studies show that people are happier when working 40 hours a week, and happier employees make for a healthier and more civil workplace. Decades of studies have also shown that productivity drops after 40 hours of work, regardless of the type of work one does. So 40 hour work weeks mean workers will be more productive in the hours they are on the job.
Employers can respond in one of three ways. They can pay their full-time salaried workers more to raise them above the threshold (and continue to demand they work more than 40 hours a week). They can pay their current salaried worker only their base salary for 40 hours and the worker gets the same pay for working fewer hours. They can increase the hours of other, typically part-time workers, or they can hire new workers to get the job done during regular hours.
The National Retail Federation predicts that an updated threshold will create tens of thousands of new retail jobs. As businesses hire new employees, the job market will tighten and employers will have to raise wages to remain competitive. That puts more money in the pockets of consumers, creates more demand for products and services, and prompts businesses to expand hiring further. It’s a virtuous cycle of growth.
History
American workers fought for over a hundred years to put limits on the time an employer can demand from his workers. The Eight Hour Day movement began in the 1820s, as the idea took hold that every working person deserves eight hours a day for rest and eight hours a day “for what we will.” The 8 hour work day was a demand for dignity, a demand to be treated like a human being, not just a “commodity.”
But the 8 hour day, 40 hour work week, did not make it into federal law until the Fair Labor Standards Act of 1938. This Act required employers to pay “overtime bonuses” to workers in industries covered by the law. But only about 20 percent of the workforce – mostly white men in large factories – received protection under the law.
However, over time – through protest, strikes, and political demands by unions and progressive elected officials – the proportion of workers with the legal right to the 40 hour work week and overtime expanded, until it reached a high of over 60 percent in 1975. Since then, employers have pushed back – by reclassifying jobs as “management” to get employees exempted from overtime rules and by supporting Presidential candidates for office who appointed Labor Secretaries who failed to ensure the overtime income threshold was raised with the cost of living.
What can you do?
Talk to everyone you know about this rule and how it could improve the wages and lives of young workers and parents with children.
Write to your Congressional Representatives and tell them you support the Department of Labor rule and want them to be sure funds will be available to advance the rule and enforce it.
Send a comment to the Department of Labor saying that you support the rule and why. If you were ever in a situation of being asked to work lots of extra hours with no overtime, please answer these questions:
- How would your life (and your family’s life) be different if you only worked 40 hours a week?
- How would your life (and your family’s life) be better if you were actually paid time and half for the extra hours you worked?
Originally published by email on June 30, 2015.