By Michelle McIntyre, Public Citizen
In the last year of the Obama administration many important worker protections are finally emerging – a stronger health standard for exposure to silica dust that will prevent more than 600 deaths from an agonizing disease, a fiduciary rule that makes financial advisors act in the best interest of their clients (shouldn’t they already be doing this?) and a soon-to-be released updated overtime pay safeguard that means millions of hardworking Americans will get a raise.
Worker advocates, economists, and unions have been working with the administration and U.S. Department of Labor (DOL) for years to make this change a reality. The expected rule will modernize and restore the protections of overtime pay that will result in millions of salaried employees being paid for the work they do beyond the standard 40 hours per week.
The middle class is working longer and harder than ever while corporate profits are skyrocketing, yet incomes remain stagnant. It’s not just political rhetoric that over the last 40 years the rules of the game have become rigged in favor of big business and the 1 percent.
The DOL update will raise the threshold for when overtime applies to salaried workers to below $50,440 annually (or $970 a week ) — meaning millions of working Americans will get a boost and have more money in their pockets, or have more time to spend with their families.
This modernized protection ensures employers think twice before demanding long work hours from their employees. Since employers will have an incentive to limit their workers to 40 hours a week, they have the opportunity to hire new staff to handle the overflow of work – thus creating new jobs.
Overtime pay, time-and-a-half, is required when any employee (paid hourly or salaried) works more than 40 hours a week if they fall under the federal earnings threshold or work nonexempt jobs – i.e. anyone who isn’t a boss of their own work – an “executive or administrator” – or a “professional”.
But the current threshold – $23,660 ($455 a week) is so low that it leaves a family of four living in poverty. The proposed updated standard would more than double the threshold and make an estimated 5 million new workers immediately qualified for overtime pay.
According to economists at the Economic Policy Institute, more than 60 percent of salaried workers were eligible for overtime in the mid-’70s, but today, only about eight percent of salaried workers are. The Department of Labor hasn’t adjusted the pay threshold for overtime work to account for the rising cost of living since 1975.
Women, minorities, people under 35 years old, and workers with less education are the workers most likely to benefit from the restored standard. But the children of these workers could be the biggest beneficiaries of the rule because their parents will now have more time to spend with them or more money to support them. With a shift to restore the traditional 40-hour work week, millions can spend more time with their families, pursue higher education, take a second job and more.
Unfortunately, unscrupulous employers take advantage of the current weak overtime protections and slack enforcement of the law to deny employees who would already qualify under the current threshold from receiving overtime pay. Unethical employers classify some workers as “managers and supervisors” though they don’t actually control their own or others’ work and pay them a salary instead of an hourly wage to avoid paying overtime.
For example, many assistant managers spend a majority of their time doing work that is not managerial in nature. When these employees are expected to work 50 or 60 hours a week, they may end up working for less than the hourly employees they nominally supervise.
Unpaid overtime is wage theft. An assistant manager in a store or a restaurant who is paid an annual salary of $25,000 and routinely works 60 hours a week is working for just $8 an hour, at or below the minimum wage in half of US states including Nebraska, South Dakota, Florida, Connecticut and Oregon.
It’s the middle class, not the wealthy few, who drive economic growth. They punch above their economic weight in consumer spending because middle-class workers put a greater share of their money directly back into the economy. Restoring overtime will give middle class families more money to spend, creating demand that businesses can use to hire more workers and spur investment in new products and services.
By updating a vastly outdated protection, the Obama administration not only stands to lift millions of individuals and families out of poverty, but to also benefit everyone by spurring new job creation and a stronger economy. Isn’t it time the middle class got a raise?