There is not one easy fix to the decades of stagnant wages in America. However, there are concrete steps that the president can take to reverse this trend. For example, the U.S. Department of Labor can update its overtime regulations, which allow employers to deny overtime pay to millions of workers who ought to receive it.
The salary threshold below which an employee is guaranteed overtime pay has not been substantially updated in decades. It is supposed to be set at a level high enough to guarantee that regular employees can’t be misclassified by their employers as exempt as a way to around paying time-and-a-half for overtime work. Back when the level was regularly adjusted, it was set at about $50,000-$60,000 a year in today’s dollars, which is reasonable and was high enough to protect most secretaries and clerks from being classified as exempt administrators, for example. It now stands at $455 a week or $23, 660 a year—$190 less than the poverty threshold for a family of four.
Today, because the salary threshold for exemption is so low, it has become common for restaurant and retail employees designated “assistant managers” to be paid a salary and denied any overtime pay, no matter how many hours they work in a week. This is especially problematic when, as is often the case, most of their work is non-managerial—they might spend most of their time waiting on customers, restocking product, or even cleaning floors. The current regulations allow employees to be classified as managers or administrators even if the vast majority of their work is routine or menial, as long as some part of it can be considered more important or supervisory work.
About 10 million workers could benefit from a rule that made clear that anyone earning less than $50,000 a year is not exempt from overtime pay and must be paid time-and-a-half for overtime work.
Secretary of Labor Perez has the power to protect workers from excessive and unpaid hours of work. He should propose a new rule that sets the salary threshold for exemption at $1000 a week. If he acts now, the rule can not only help employees who work hard get ahead; it can also provide a boost to the economy by putting money into the pockets of workers who are likely to spend it. Yet another benefit is the possibility that it will discourage employers from scheduling excessive work and encourage them to hire additional workers rather than pay time and a half for overtime.
EPI Vice President Ross Eisenbrey has written extensively on this issue and is available for interviews. For more information on EPI’s work on overtime issues, visit the links below or contact Dan Crawford at dcrawford@epi.org.
Policy Memo: Updating Overtime Rules Is One Important Step in Giving Americans a Raise
New York Times op-ed: It’s Time to Update Overtime