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. In the new Economic Policy Institute report It’s Time to Update Overtime Pay Rules, EPI economist Heidi Shierholz examines who is being covered by overtime protections and finds that to cover the same share of workers as were covered in 1975, the overtime salary threshold should be $1,122 per week, even after accounting for the shift toward higher-level white collar professional and managerial jobs that require higher levels of education.
“Most workers used to get time and a half when they worked long hours, but now millions of workers work long hours without fair compensation,” said Shierholz. “The salary threshold has been allowed to fall to $455 per week, which is less than the poverty threshold for a family of four. To match historical benchmarks, it should be $1,122 per week.”
Some argue that because the labor market has changed since 1975, in particular that now a larger a share of the workforce is in higher-level white collar professional or managerial roles, it is appropriate that the share of workers covered by overtime protection is somewhat lower today. Since these higher-level jobs require higher levels of education, a reasonable way to control for these changes in the labor market is to look at what has happened within educational categories. Shierholz finds that in 2013 the share under the salary threshold was much lower than it was in 1975 within every education category. 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. These education breakdowns show that the shift toward higher-level jobs requiring higher levels of education does not come close to fully explaining the post-1975 drop in the share of salaried workers falling under the threshold for automatic access to overtime protections. The threshold that would cover roughly the same share of workers as were covered in 1975 within each education category is $1,122.
“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,” said Shierholz. “The Department of Labor should set the threshold for overtime at $1,122 per week.”