President Barack Obama, aiming to increase jobs and financial security for middle-class workers, proposed raising the overtime threshold to cover nearly 5 million more Americans. As early as 2016, the threshold to qualify for overtime pay will be $50,440, more than doubling the previous minimum of $23,660.
The new threshold will follow the 40th percentile of income, much like former President Franklin Delano Roosevelt’s did when the overtime rule was first created in 1938 to combat the Great Depression. Nearing the end of the New Deal, which featured a series of domestic reforms in order to put the Great Depression in the rearview, Roosevelt’s Fair Labor Standards Act, which along with overtime pay also mandated a national minimum wage and ended child labor, was one of the most progressive laws in history.
Now, nearly 80 years later, Obama is making strides to renumber the threshold to include more Americans.
Why does this matter?
WIthout the threshold increasing, anyone working overtime while making more than $23,660 was not guaranteed to get paid for anything more than the 40-hour average. So, if you were a full-time salaried worker who made $30,000 annually, but put in 50 hours a week, you’d essentially be working 10 hours each week for no pay. Not only was a worker under that category not paid for hours logged, but overtime pay also guarantees time-and-a-half, meaning even more money was being lost.
Just about all workers falling under the national median income would be affected by this adjustment to the law, seeing that the average American worker makes $51,939, according to a 2014 U.S. Census Bureau report.
A recent Gallup poll showed that Americans report working an average of 47 hours a week, with 18 percent saying they work upwards of 60 hours each week. This means the average American is getting robbed for seven hours of essentially free work, when they should be getting paid time-and-a-half for an average of 336 hours a year.
Increasing the threshold for overtime work could open doors to a much better economy, Robert Reich, former Secretary of Labor under President Bill Clinton, and Nick Hanauer, a Seattle-based entrepreneur, wrote in their article, "Overtime Pay is the Minimum Wage for the Middle Class."
“When workers have more money, businesses have more customers; and when businesses have more customers, they hire more workers,” the article read.
Reich and Hanauer suggested that CEOs would be faced with decisions of either increasing the pay of lower- and middle-income workers or hiring more workers to fulfill those overtime hours that won’t be ignored anymore. Prior to Obama’s proposal, Americans would have to live below the poverty threshold of $24,008 — for a family of four — before a worker could qualify for overtime pay.
The Obama administration estimated that the new proposal will give $1.3 billion to American workers and create more jobs. Critics of the initiative claimed that businesspersons and employers will be discouraged to hire salaried workers and instead start hiring more part-time or full-time workers.
This is just the second time the Department of Labor addressed the overtime threshold since 1975, when 62 percent of workers qualified for overtime pay, compared to just 8 percent today. According to a New York Times article, Republicans could attach a “so-called rider undoing the change to must-pass appropriations measure later this year.” The rule, likely to be completed in 2016, sees challengers on both sides of the party spectrum, but could still see action soon.
Based in Washington, DC, Grant works as a program assistant at SEEP Network, an international development nonprofit. A proud graduate of the University of Maryland, Grant spent four months post-grad living in Armenia where he worked for Habitat for Humanity and the World Food Programme. Grant is passionate about humanitarianism and finding sustainable approaches to international development. He enjoys playing trivia with friends but is still seeking his first victory - he ceaselessly blames his friends lack of preparation.