Middle Class Economics Rewarding Hard Work by Restoring Overtime Pay
Middle class economics means that a hard day’s work should lead to a fair day’s pay. For much of the past century, a cornerstone of that promise has been the 40-hour workweek. But for decades, industry lobbyists have bottled up efforts to keep these rules up to date, leaving millions of Americans working long hours, and taking them away from their families without the overtime pay that they have earned. Business owners who treat their employees fairly are being undercut by competitors who don’t.
Today, President Obama announced that the Department of Labor will propose extending overtime pay to nearly 5 million workers. The proposal would guarantee overtime pay to most salaried workers earning less than an estimated $50,440 next year. The number of workers in each state who would be affected by this proposal can be found here.
The salary threshold guarantees overtime for most salaried workers who fall below it, but it is eroded by inflation every year. It has only been updated once since the 1970s, when the Bush Administration published a weak rule with the strong support of industry. Today, the salary threshold remains at $23,660 ($455 per week), which is below the poverty threshold for a family of four, and only 8 percent of full-time salaried workers fall below it.
President Obama directed the Secretary of Labor to update regulations relating to who qualifies for overtime pay so that they once again reflect the intent of the Fair Labor Standards Act, and to simplify the rules so they’re easier for workers and businesses to understand and apply. Following months of extensive consultations with employers, workers, unions, and other stakeholders, the Department of Labor developed a proposal that would:
- Raise the threshold under which most salaried workers are guaranteed overtime to equal the 40th percentile of weekly earnings for full-time salaried workers. As proposed, this would raise the salary threshold from $455 a week ($23,660 a year) – below the poverty threshold for a family of four – to a projected level of $970 a week ($50,440 a year) in 2016.
- Extend overtime pay and the minimum wage to nearly 5 million workers within the first year of its implementation, of which 56 percent are women and 53 percent have at least a college degree.
- Provide greater clarity for millions more workers so they – and their employers – can determine more easily if they should be receiving overtime pay.
- Prevent a future erosion of overtime and ensure greater predictability by automatically updating the salary threshold based on inflation or wage growth over time.
A Hard Day’s Work Deserves a Fair Day’s Pay
It’s been a good few days for America.
On Thursday, the Supreme Court reaffirmed the Affordable Care Act. It is here to stay.
And, Democrats and Republicans in Congress paved the way for the United States to rewrite the rules of global trade to benefit American workers and American businesses.
On Friday, the Court recognized the Constitutional guarantee of marriage equality. With that ruling, our union became a little more perfect — a place where more people are treated equally, no matter who they are or who they love.
These steps build upon America’s steady progress in recent years. Out of the depths of recession, we’ve emerged ready to write our own future. Our businesses have created 12.6 million new jobs over the past 63 months — the longest streak on record. More than 16 million Americans have gained health insurance. More kids are graduating from high school and college than ever before.
But more work lies ahead, if we are to succeed in making sure this recovery reaches all hardworking Americans and their families.
We’ve got to keep expanding access to affordable health care. Right now, 22 states haven’t expanded Medicaid — even though, under the ACA, they can. We’ll keep encouraging those governors to do the right thing for their constituents. And we’re making sure people know all the ways that they can benefit from the ACA. Wednesday, I’ll go to Tennessee to meet Americans whose lives have been changed by this law, and to talk about how, instead of refighting settled battles of the past, we can move forward together.
We’ve got to keep making sure hard work is rewarded. Right now, too many Americans are working long days for less pay than they deserve. That’s partly because we’ve failed to update overtime regulations for years — and an exemption meant for highly paid, white collar employees now leaves out workers making as little as $23,660 a year — no matter how many hours they work.
This week, I’ll head to Wisconsin to discuss my plan to extend overtime protections to nearly 5 million workers in 2016, covering all salaried workers making up to about $50,400 next year. That’s good for workers who want fair pay, and it’s good for business owners who are already paying their employees what they deserve — since those who are doing right by their employees are undercut by competitors who aren’t.
That’s how America should do business. In this country, a hard day’s work deserves a fair day’s pay. That’s at the heart of what it means to be middle class in America.
- Notice of Proposed Rulemaking (PDF)
- Overtime Resources
- A Hard Day’s Work Deserves a Fair Day’s Pay (Huffington Post)
- Frequently Asked Questions (PDF)
- Fact Sheet on Proposed Rule (PDF)
Thursday, July 2, 2015 – 2:20 PM ET
President Obama delivers remarks on the economy
Recreational Eagle Center, University of Wisconsin-La Crosse, La Crosse, Wisconsin