Why This New Overtime Rule Is A Big, Big Deal

Dave Johnson

Overtime pay for working more than 40 hours a week is a right that had been taken away from many workers, but now they are getting the right back, thanks to a new rule the Obama administration issued Wednesday.

This is a big, big deal. Soon a lot of people will get to spend time with their families, or get paid for the hours they work past 40 in a week.

Currently, if a “salaried” worker makes more than $23,660 a year, the pay stops at 40 hours but the work hours don’t. Employers have been able to squeeze free work out of people just by declaring them to be “salaried.” Again, repeated because it is unbelievable, workers who are paid a salary of $23,660 or more do not get overtime (or any extra pay at all) when they work more than 40 hours in a week. In other words, there are a lot of workers who are labeled “managers” who work effectively for less than $10 an hour, given workweeks that could last 50 hours or more.

The new rule raises this overtime salary threshold to $47,476. The rule goes into effect December 1. After December 1, if you make less than $47,476, either the work stops at 40 hours or you get paid for the time. And not just paid, but time-and-a-half.

This change will affect 12.5 million workers. Thanks to this rule, workers now putting in as many as 70 hours a week will either be cut to 40 hours for the same pay, or will receive overtime pay for the extra hours. Many employers will choose to elevate part-time workers to full-time or hire new workers to avoid the time-and-a-half pay for those hours. Others will choose to boost worker pay above $47,476.

Restoring overtime will put more money in the pockets of working people. This happens either because people working more than 40 hours will start getting paid for that time or because part-time workers will get extra hours and new people will be hired.

More money in the pockets of working people means local businesses will see increased demand as more customers with more money to spend walk through the door. It means a boost to the economy. It means fewer people needing assistance with basic things like food. It means that parents will likely be able to spend more time with their children. It means all kinds of changes for working people and the economy, all of them good. This is a big deal.

But get this, as significant a raise as this is, according to the Economic Policy Institute (EPI), even with the new overtime rule the percent of workers who are eligible for overtime pay is still lower than it was in 1975. Unbelievable.

The following excerpt is from the White House blog, “Email from President Obama: An Update on Overtime“:

If you work more than 40 hours a week, you should get paid for it or get extra time off to spend with your family and loved ones. It’s one of most important steps we’re taking to help grow middle-class wages and put $12 billion more dollars in the pockets of hardworking Americans over the next 10 years.

For generations, overtime protections have meant that an honest day’s work should get a fair day’s pay, and that’s helped American workers climb the ladder of success. That’s what middle-class economics are all about. But after years of inflation and lobbyists’ efforts to weaken overtime protections, that security has eroded for too many families.

… This is a step in the right direction to strengthen and secure the middle class by raising Americans’ wages. When workers have more income, they spend it – often at businesses in their local community – and that helps grow the economy for everyone.

Republicans, of course, are vowing to do everything the can to fight this. For example, The Washington Examiner reports that House Speaker Paul Ryan and other Republican lawmakers issued statements criticizing the new overtime rule and vowing to fight it, saying the rule would hurt workers and businesses around the country. Republicans have legislation they have introduced that would overturn the rule.

The new rule takes effect December 1, 2016. President Obama will have been in office almost eight years. Eight years is a very long time for working people and the economy to wait. You have to wonder why it took the administration so long; this effort only began in earnest in early 2014 with an executive order asking the Labor Department to draft, receive public input and revise the overtime rule. And aside from all of the people this helps, you also have to wonder about the political instincts of this administration. Had they issued this rule three years ago, the boost to the economy might have meant a Democratic House and Senate now. Had this rule been in place a year ago, the boost to worker pay would be helping a Democrat get elected president this year.

Nonetheless, it is still a powerful defining issue in this 2016 election campaign. Either we go with the business allies of Donald Trump who believe the extra time and labor of low-wage workers should be exploited without compensation, or we believe in restoring the bargain we used to have with lower-wage workers that they deserve the humanity of a 40-hour workweek and the fairness of time-and-a-half for working overtime.

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