The U.S. Department of Labor is overhauling overtime pay rules, which have dramatically eroded and currently allow employers to deny overtime pay to millions of workers who would have received it in the past. A new Economic Policy Institute feature outlines why now is the time to update overtime pay rules and explains that one reason Americans’ paychecks are stagnant is that millions of middle-class and even lower-middle-class workers are working overtime and are not getting paid for it. Why It’s Time to Update Overtime Pay Rules: Frequently Asked Questions provides a comprehensive overview of the issue and answers key questions, including who’s eligible for overtime pay, why the current rules are outdated, how they can be updated, who would benefit from these changes, and what economic effects these changes could have.

“One major and absolutely fixable reason Americans haven’t seen a raise is that their right to earn overtime pay for working excessive hours has eroded,” said EPI Vice President Ross Eisenbrey. “Updating overtime rules is necessary not only to meet historical standards but to reinforce the ideal that workers deserve to be compensated fairly for their time and work.”

Key findings include:

• The overtime salary threshold of $455 per week ($23,660 per year) is less than the poverty threshold for a family of four.
• If the overtime salary threshold were raised to $984 per week ($51,168 per year)—simply the 1975 threshold adjusted for inflation—millions of lower-paid white-collar employees would be guaranteed the right to overtime pay if they work more than 40 hours a week, regardless of the nature of their job. Indexing this threshold to inflation going forward would ensure it maintains its real value.
• If the salary threshold were increased to $984 per week, 6.1 million lower-paid white-collar workers would be newly automatically covered by overtime protections. This increase would disproportionately help women, blacks, Hispanics, workers under age 35, and workers with lower levels of education because these workers are more likely than other subgroups to have lower salaries that put them below the proposed new threshold.
• Because salaried workers at the pay levels that would be newly covered by an increase in the overtime threshold (most earn less than $50,000) do not have markedly greater levels of work scheduling flexibility than their hourly paid counterparts, there is little danger that making this change would noticeably reduce their work scheduling flexibility.
• The rule changes could encourage employers who want to avoid paying overtime, to hire new workers to do the extra work at the standard wage or increase the hours of those who are involuntarily working part-time. This could create work hours for the underemployed workers who need them.