Obama’s Labor Rule on Overtime

This article by Dean Baker at the Center for Economic and Policy Research details the US Dept. of Labor’s stance on why this change is necessary. You will find that the current threshold (less than $24,000/year) for classifying employees as salaried exempt was set in 1975 has not been adjusted for inflation or productivity in 40 years.

Lunch break on the Empire State Building (Lewis Hine)

The Fair Labor Standard Act was established to protect American workers from gross economic exploitation. It sought to do so by establishing a legal hourly minimum wage and also to insure that workers would not suffer work hours that exceeded 40 hours per week. Overtime requirements were set by the FLSA to discourage employers from compelling excessive workloads. Baker points out that millions of workers have been classified as supervisory in an effort to game the FLSA and cause employees to work as much as 60 hours per week on a salary of $24,000. If the $24,000 salary had been adjusted for inflation the current level would be $50,440. This does not take increases in worker productivity into account which, as Baker says would place the threshold at closer to $100,000. Anticipating the “pushback” from Business, Baker observes that when this rule was set in 1975 it hardly caused an economic ripple. He does not venture into the macro economic effects such as increased discretionary income for millions of American workers that will surely translate into an increase in consumer demand (sales).