12.5 Million Americans: the number of people that the Economic Policy Institute (EPI) estimates will be affected by President Obama’s changes to the overtime rule.
Today, the Department of Labor, under President Obama’s direction, will update the threshold for salaried workers who automatically qualify for overtime when they work more than 40 hours a week.
“We’re making more workers eligible for the overtime that you’ve earned. And it’s one of the single most important steps we can take to help grow middle-class wages,” said President Obama.
“New overtime protections mark a major victory for working people that will improve the lives of millions of families across America,” said Richard Trumka, President of the AFL-CIO. “We applaud the Obama Administration heeding the call for action to ensure working people get paid for all the hours we work. Taking this step to restore overtime is one of the many ways we are beginning to change the rules of our economy that are rigged in favor of Wall Street.”
“The fight for even stronger overtime protections and to raise wages for all working people continues. But today, millions of workers will receive a long overdue raise, healthier and more productive jobs, and more time to spend with our community and loved ones,” added Trumka.
This simple rule change will have a significant impact on our local and national economy. The White House estimates this rule change will put $12 billion dollars into the hands of hard working Americans over the next ten years.
The DOL is lifting the threshold for salaried workers from just over $23,660 a year to $47,476. This means that if you are a salaried employee who makes less than $47,476 dollars you will now be entitle to overtime (time and 1/2) for every hour worked in a week above 40.
This doubles the current salary threshold while being responsive to public comments regarding regional variations in income by setting the salary threshold at the 40th percentile of full-time salaried workers in the lowest income Census region (currently the South). Tying the salary threshold to the lowest-wage region of the country has strong historical precedent in previous rulemakings.
This salary threshold will be reevaluated and updated every three years ensuring that if continues to meet the 40th percentile mark.
Employers have used this low salary threshold to cheat workers out of higher wages for decades. Many of these workers routinely work 50-60 hours a week and are paid a flat rate. In some cases salaried workers were putting in so many extra hours, without any additional pay, that their per-hour rate would drop below the federal minimum wage of $7.25 an hour.
Now employers will have to choose between raising the wages of salaried employees or keeping employees at their current salary but reducing the number of hours they work in a week. Reducing the number of hours worked would lead to job growth as employers will need to hire additional workers to fulfill their needs.
Check out this short video from the White House that explain the rule change and how it will effect individual salaried workers.
EPI estimates that raising the overtime salary threshold will directly benefit a broad range of working people, including:
- 6.4 million women, or 50.9 percent of all directly benefiting workers
- 4.2 million parents and 7.3 million children (under age 18)
- 1.5 million blacks, and 2.0 million Hispanics
- 4.5 million millennials, defined as workers age 16 to 34 (who make up 28.2 percent of the salaried workforce but 36.3 percent of directly benefiting workers)
- 3.6 million workers age 25 to 34 (who make up 22.9 percent of the salaried workforce but 28.7 percent of directly benefiting workers)
- 3.2 million workers with a high school degree but not more education (who make up 15.5 percent of the salaried workforce but 25.3 percent of directly benefiting workers)
This is a monstrous step in the right direction to lift the wages of millions of Americans. The White House estimates that the new rule is expected to extend overtime protections to 4.2 million more Americans who are not currently eligible under federal law.
The new rule is slated to take effect on December 1st of this year.
Below are a couple of charts from the EPI that break down what industries will see the biggest boost from this new rule change and the number of workers impacted by the new rule, state by state.
In New Hampshire, over 54,000 workers will be directly effected by this new rule change. Texas, Florida and California will see the biggest increases with over 1 million workers benefiting from this change.