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Bernstein: New Overtime Rules “Add Some Balance on Behalf of Working People”

June 30, 2015 at 12:15 PM

At the Washington Post’s “Post Everything” blog, CBPP Senior Fellow Jared Bernstein explains why the President’s change in the eligibility rules for overtime pay could help millions of workers.  Here are some excerpts:

By significantly increasing the salary threshold below which salaried workers get overtime pay, President Obama just took a big step toward updating a critical labor standard with the potential to boost the paychecks of millions of middle-wage workers, many of whom should be getting overtime but are not....

[This] “rule change” — analogous to an executive order — ... involves the updating of labor standards introduced in the Fair Labor Standards Act (FLSA) of 1938, legislation that included a national minimum wage and time-and-a-half pay for hourly and certain salaried workers after 40 hours of weekly work.

Why cover any salaried workers?  Because the law needed to preempt the possibility that some employers might just label someone a salaried worker to avoid having to pay time-and-a-half.  So a salary threshold was introduced, below which workers were automatically non-exempt.  The problem is the threshold wasn’t regularly adjusted for inflation, and while it has been sporadically raised, it has fallen well behind its historical levels, once you adjust for inflation....

The current threshold is only about $23,700.  The president’s proposal takes it up to $50,400, about $970 per week....

Trust me on this: you’d be very hard pressed to come up with a rule change or executive order — i.e., non-legislation — to lift the pay of this many middle-wage workers.  That’s important, because we live in a time when the bargaining power of many who depend on their paychecks is much diminished relative to the clout and power of those whose income derives from their wealth portfolios.

This isn’t the first time in our history when such conditions prevailed.  In fact, the FLSA was born of the acute realization that one role of government was to help rebalance those powers, to stand up for those who, absent rules like OT [overtime], risked exploitation, overwork, and inability to claim their fair share of the productivity growth they themselves were helping to generate.

All the president did Monday was to put a powerful thumb on the scale to add some balance on behalf of working people.  And for that he deserves our thanks.

Click here for the full post.