Today, the U.S. Department of Labor announced its final overtime rule, which will set the salary threshold under which salaried workers are automatically entitled to overtime pay to $35,568 a year. While the administration may be trumpeting this rule as a good thing for workers, that is a ruse. In reality, the rule leaves behind millions of workers who would have received overtime protections under the much stronger rule, published in 2016, that Trump administration abandoned.
The background of the 2016 rule is important for understanding the impact of the administration’s move today. The 2016 rule would have increased the threshold to $47,476 and then indexed it to wage growth going forward. That rule was the result of an exhaustive rulemaking process spanning more than two years. However, shortly before the 2016 rule was set to go into effect, a single district court judge in Texas, using highly flawed logic, enjoined the department from enforcing the rule, and the court later erroneously held the rule to be invalid. Despite what the judge claimed, the 2016 rule was by no means overly expansive. In fact, it covered far fewer workers than the threshold had covered historically. In 1975, more than 60 percent of full-time salaried workers earned below the threshold. By 2016, the share of workers covered had dropped to less than 7 percent. The 2016 rule would have only partially restored this coverage, to roughly 33 percent.
Despite the fact that the 2016 threshold was well within historic norms, the Trump administration abandoned it and finalized an overtime rule with a dramatically lower threshold. It’s worth noting that if the rule had simply been adjusted for inflation since 1975, today it would be roughly $56,500. This is more than $20,000 higher than the Trump administration’s level! I estimate that roughly 8.2 million workers1 who would have benefited from the 2016 rule will be left behind by the Trump administration’s rule. This 8.2 million is made up of 3.2 million workers who would have gotten new overtime protections under the 2016 rule and won’t get them under the Trump rule, and 5.0 million who would have gotten strengthened overtime protections under the 2016 rule and won’t get them under the Trump rule. That means this administration is turning its back on millions of workers including 4.2 million women, 2.9 million people of color, 4.6 million workers without a college degree, and 2.7 million parents of children under the age of 18. Further, the annual wage gains are $1.4 billion dollars less under the Trump administration’s rule than under the 2016 rule—and these annual earnings losses will grow enormously over time as the threshold erodes, because the Trump administration neglected to include automatic indexing in their rule. Even further, the rule is dramatically out of step with historic precedent for setting the threshold, leaving it open to legal challenge.
At its heart, the Trump administration’s rule is based on the notion that someone making $35,568 a year is a well-paid executive who doesn’t need or deserve overtime protections. The administration did not need to undertake a new rulemaking—they could have defended the 2016 rule, and supported middle-class workers and their families. Instead, once again, President Trump has sided with the interests of corporate executives over those of working people.