“Two days ago, President Obama announced that he’s taking the easiest route to fixing this loophole. He is updating the standards so that employers cannot deny overtime pay to any worker who makes less than $50,440 annually. This is a dramatic change from the current $23,660 threshold, but it actually just brings us back to 1975 standards when adjusted for inflation.”
Imagine a mother is supporting her three children by working at a fast food restaurant. She receives a promotion with a vague title like “apprentice” or “assistant manager” and transitions from a lower hourly wage to $24,000 yearly. Her family is still in poverty, but on paper it appears to be an improvement.
She is surprised to find that her new job is almost exactly the same. She still spends her time preparing food, serving customers, and cleaning. There is one key difference: because her new title classifies her as a manager, she no longer logs her hours. Whether she works 40 or 60 hours, she gets paid the same.
She is required to work a minimum of 50 hours, but sometimes she has to work more than 65. These weeks a third of her time is unpaid, and her earnings average to about $7 per hour of work—below the minimum wage.
Additionally, all these extra hours on the job may mean she has to pay someone to take care of her children while she’s at work, placing a further strain on the family’s finances and reducing her quality time with her kids.
This is the reality under the current overtime system. A promotion like this can actually result in less, not more economic security, for millions of working people.
Congress created the Fair Labor Standards Act back in 1938 to protect people like our mother of three. Yet, recently, due to inflation and loosened guidelines, she has less protection now than she would have had in the early 1950s.
Back then, the law guaranteed that someone with her salary (adjusted for inflation) not only get paid for every hour over 40, but get paid time and a half. Even if her salary was higher, the rules still protected overtime for anyone who spent less than 80% of their time doing management work.
Today, if our mother’s boss assigns her as little as five minutes of administrative work each week, he can make her a salaried worker ineligible for overtime pay.
Two days ago, President Obama announced that he’s taking the easiest route to fixing this loophole. He is updating the standards so that employers cannot deny overtime pay to any worker who makes less than $50,440 annually. This is a dramatic change from the current $23,660 threshold, but it actually just brings us back to 1975 standards when adjusted for inflation.
It seems unlikely that this executive order will survive without challenges in Congress and the courts. But the Economic Policy Institute estimates that this threshold update will guarantee overtime pay for 3.1 million mothers and 3.2 million fathers, benefiting a combined 12.1 million children. Hopefully, both branches of our government will recognize that this overhaul is bringing these families’ back to where Congress meant them to stay.
In the worst case scenario, employers may lower their employee’s wages to account for the overtime they expect them to do, and little may change for our mother of three and millions of other working families struggling to make ends meet. But in the best case, employers may reduce overtime hours, create new jobs, and finally pay their employees the money they’ve earned.