Last night, Barack Obama announced a big increase in the overtime threshold. For millions of Americans, this could mean a significant earnings increase, and/ or better working conditions. A rare sign of progress in the class war.
The overtime threshold is the level of pay under which your employer is obligated to pay you overtime for working more than 40 hours per week. Obama is raising the overtime threshold from $23,660 a year all the way up to $50,440 a year. Since the rule change doesn’t require Congressional approval, it’s actually happening. This increase will “restore the overtime salary threshold to roughly where it stood in 1975 in terms of purchasing power.”
Two weeks ago, when we interviewed the progressive billionaire Nick Hanauer, who was involved in lobbying for this rule, he said “The overtime threshold is to the middle class as the minimum wage is to low-wage workers.” He explained its importance like this:
Today, the average full time worker works 47 hours a week. And they work those [extra] seven hours mostly for free, because today, less than 10% of salaried workers are entitled to overtime. If you earn more than $23,600 a year—if your employer pitches you a fake title like “assistant manager,” they don’t have to pay you overtime. And as a consequence, all over the country people are working for $27,000 a year and working 70 hours a week doing basically: one person doing the job of one and a half. So as an employer I can get two people to do the work of three, and think about what that does for profits... what I’ve done effectively is not just increase my profits, but I’ve taken a job out of the economy, and in so doing I’ve softened the labor market. And the softer the labor market is, the more leverage I have in my wage negotiations. And as a consequence we have this relatively high persistent unemployment. But if employers have to pay people overtime, they’re not going to want to do that. So now I’m going to have to get three people to do the job where two were doing it before. I add a person to the work force. I reduce the level of unemployment. I increase the level of demand in the economy. And I put upward pressure on wages.
This should be a good thing.