Middle Class Wages to Get Boost with Overtime Change

The $913 per week salary level was set by the Labor Department at the 40th percentile of earnings of full-time salaried workers in the lowest wage census region, the South. It is estimated that between 4 and 5 million salaried workers will be affected by the change and that these workers could receive as much as $1.3 billion dollars in additional income. In some cases, this additional income will come as overtime pay; in other cases, employers may raise a worker's base salary to be above the $913 threshold.

(Initial estimates of beneficiaries from businessinsider.com)

April 2015 - The Labor Department is drafting new rules for overtime compensation, which will require that U.S. businesses pay more employees time-and-a-half after 40 hours of work. Middle class wages in America continue to stagnate and this change will address one cause of that stagnation: many employees who earn as little as $23,660 a year are considered "managers" and, therefore, are not entitled to overtime pay.

The US law that established the federal 40-hour workweek exempted professional, administrative, and executive employees from overtime compensation. The US Labor Department is authorized to define these categories and does that, in part, through a minimum salary level. Under consideration is an increase in that salary level.

The minimum salary level today for exempted employees is $23,660 which is less than the federal poverty level for a family of four. Changing that level to an inflation-adjusted equivalent of the 1975 level, as set by President Gerald Ford, would increase that minimum salary level to ~$51,000. The Economic Policy Institute believes an increase of this magnitude would cover about six million additional workers.

(image from cnn.com)

A classic example of one of those six million workers is former Dunkin Donuts "manager" Gassan Marzuq, who would work up to 75 hours a week on his $42,000 a year salary. Most of those hours were not logged in the performance of management tasks but, rather, in handling tasks usually performed by entry-level personnel. In spite of this, a federal judge ruled that Marzuq was a "bone fide executive" under existing regulations, and not entitled to overtime pay. "I worked my butt off for them…never saw my kids growing up", said Marzuq, who was fired after complaining about the excessive overtime requirements.

Most Republicans, of course, are as adamantly opposed to the proposed Labor Department change as they are to an increase in the minimum wage, both of which benefit the average American. In this case the GOP argues that raising the overtime exemption level will kill job growth and/or limit career advancement. Once again, they aren't thinking things through on this one. Here's why:

• In fact, per a recent study by University of Texas economist Daniel Hamermesh, it is likely that businesses will a) reduce overtime hours for existing "management" workers so as to minimize overtime pay and b) hire additional workers at straight time to make up for those reduced overtime hours.


• As far as limiting career advancement, let's be honest. How many of those "managers" actually have the opportunity to advance? They were hired with the expectation of working unpaid overtime so the company would not have to hire additional workers. Great for the company executives, but crappy for the "manager" and for the Americans with entry-level skills who can't get a job.

{Thanks to Bloomberg News writer Mike Dorning, whose recent internet article is the basis for our story.}