In March of 2014, President Obama announced that the Department of Labor would adjust the salary threshold that determines which workers are eligible for overtime pay, so that low-paid salaried workers get paid overtime when they work long hours. Currently, salaried workers who earn more than $455 per week ($23,660 per year) may be exempt from being paid time-and-a-half for working more than 40 hours a week. EPI has previously recommended that the salary threshold be increased to $984—equal to its level in 1975, adjusted for inflation.
In Increasing the Overtime Salary Threshold is Family-Friendly Policy, EPI economist Heidi Shierholz examines who would be affected by this rule change and finds that raising the threshold to $984 would make 6.1 million more salaried workers eligible for overtime. In the first demographic breakdown of who would be affected by the rule change, Shierholz finds that an increase of this level would disproportionately help women, blacks, Hispanics, workers under age 35, and workers with lower levels of education. The newly covered workers would be those at the low end of the salary scale, who have limited power to bargain over their wages or hours.
“Raising the salary threshold for overtime will help low-paid managers and professionals, especially women and people of color, who are not being compensated when they work over 40 hours a week,” said Shierholz. “It’s clear that the Department of Labor should raise the threshold to $984, or even higher, so that low-paid white-collar workers are treated fairly.”
The exemption was originally designed for well-paid executives and professionals. However, since it has not been adjusted for inflation, it has eroded 57.5 percent from its peak value and no longer covers the vast majority of workers it was designed to protect. Millions of workers, who are salaried but not highly-compensated, are not paid time-and-a-half when they work more than 40 hours a week. If the threshold is increased, these workers will either be able to stick to a 40 hour work week, or be fairly compensated for their extra work.
“This is one hundred percent family-friendly policy,” said Shierholz. “Whether parents get paid more or are allowed to leave work on time and spend time with their kids, either way families win.”
The Department of Labor is expected to issue a proposed rule change this fall. EPI has advocated for changes to overtime regulations since at least 2008. Additional resources on the overtime rule change include: