Washington, D.C. — Guaranteed overtime rights are on the brink of extinction if the U.S. Department of Labor does not move to protect them, according to a new issue brief released today by the Center for American Progress. The Department of Labor should raise the salary threshold to at least $50,000, approximately its 1975 value.
“The current overtime-salary threshold makes a mockery of traditional American notions of work and success, as working harder and putting in extra hours no longer means extra pay for middle-class Americans. Modernizing the salary threshold and extending guaranteed overtime rights to middle-class workers would restore basic principles of fairness to the labor market,” said Brendan V. Duke, Middle-Out Policy Analyst at the Center for American Progress and author of the issue brief. “A decision not to raise the threshold is a decision to let guaranteed overtime rights continue their march toward extinction.”
For the past 30 years, middle- and working-class families have been squeezed as the cost of living rises faster than their incomes. More and more families are struggling and are living paycheck to paycheck. Americans could once boost their paychecks by boosting their hours at work because federal overtime rules guaranteed them time-and-a-half pay for hours worked beyond 40 hours per week. But only 18 percent of full-time workers have guaranteed overtime rights today. If current trends continue, no one will qualify for guaranteed overtime by 2030. For many Americans, it is simply no longer the case that if one works harder and longer, he or she will be rewarded.
Fortunately, the Obama administration recently instructed the U.S. Department of Labor to modify federal overtime-eligibility rules, including the “salary threshold”—the amount of weekly earnings a worker has to earn before he or she no longer qualifies for guaranteed overtime rights. Modernizing overtime rules would restore the basic American promise that workers who work extra hard deserve extra pay.
This issue brief finds that:
The overtime-salary threshold’s real value has declined by more than half since its peak in 1975. Part of this is because of the failure to adjust it for inflation, but it is also because of a radical rule change in 2004 that placed the overtime-salary threshold at just $455 per week—well below previous threshold changes in real terms, which were at least $800 per week in inflation-adjusted dollars and above the average wage.
The inadequate 2004 overtime-threshold change and the failure to raise it since have placed overtime rights on the brink of extinction: 47 percent of full-time workers’ salaries guaranteed them overtime rights in 1980. Today, this is true for only 18 percent of workers. No workers will have guaranteed overtime rights by 2030 if current trends continue.
The current salary threshold of slightly more than $23,600 essentially equals the federal poverty threshold. By definition, the right to overtime pay for overtime work no longer exists for the American middle class.
The Department of Labor should raise the salary threshold to at least $960 per week—approximately $50,000 per year—roughly its 1975 level. U.S. real gross domestic product, or GDP, and worker productivity have only grown since the 1970s, and as a result, we can well afford to grant workers the same overtime rights that they had in 1975.