Changes in labor market policies and practices have played a key role in the rise of inequality and the wage stagnation the vast majority of workers have seen since the 1970s. One example is the erosion of workers’ right to earn overtime pay for working excessive hours.
To ensure the right to a limited workweek, the Fair Labor Standards Act (FLSA) requires that workers covered by FLSA overtime provisions must be paid at least “time-and-a-half,” or 1.5 times their regular pay rate, for each hour of work per week beyond 40 hours. The rule is meant to protect workers who lack control over their time and tasks and do not receive high pay. The rule aims to exclude professional and managerial employees from overtime pay requirements by exempting workers who pass certain “duties tests” or who make over the salary threshold under which all salaried workers, regardless of their work duties, are covered by the overtime provisions. However, this salary threshold has been changed only once since 1975 and it is not indexed to inflation.
The figure below shows the share of salaried workers under the salary threshold in 1975 and 2013 by education level. In 2013, in every education category, the share under (and protected by) the salary threshold was much lower than it was in 1975. For example, fifty-one percent of salaried workers with a college degree were covered by the salary threshold in 1975, compared with just six percent in 2013. As detailed in this recent EPI report, the salary threshold would need to be $1,122 per week to cover similar shares of workers as were covered in 1975.
In 2013, in every education category, the share of workers protected by the salary threshold was much lower than it was in 1975: Share of salaried workers covered by the salary threshold, by education, 1975 and 2013
|1975, under the 1975 threshold ($984)||2013, under the 2013 threshold ($455)|
|Less than high school||85%||48%|
Note: A salaried worker is a worker who is paid on a regular schedule and receives a guaranteed minimum amount on each pay date regardless of hours worked.
Source: Author’s analysis of Current Population Survey Outgoing Rotation Group microdata