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America’s Incredible Shrinking Overtime Rights Need an Update

America’s Incredible Shrinking Overtime Rights Need an Update

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Guaranteed overtime rights are on the brink of extinction if the U.S. Department of Labor does not move to protect them.
Guaranteed overtime rights are on the brink of extinction if the U.S. Department of Labor does not move to protect them.

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Published by: Center for American Progress on Jun 24, 2014
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1 Center for American Progress | America’s Incredible Shrinking Overtime Rights Need an Update
America’s Incredible Shrinking Overtime Rights Need an Update
By Brendan V. Duke June 23, 2014
For he pas 30 years, middle- and working-class families have been squeezed as he cos of living rises faser han heir incomes. More and more families are sruggling and are living paycheck o paycheck.  Americans could once boos heir paychecks by boosing heir hours a work because federal overime rules guaraneed hem ime-and-a-half pay for hours worked beyond 40 hours per week. Bu only 18 percen of full-ime workers have guaraneed overime righs oday. If curren rends coninue, no one will qualify for guaraneed overime by 2030. For many Americans, i is simply no longer he case ha if one works harder and longer, he or she will be rewarded.Forunaely, he Obama adminisraion recenly insruced he U.S. Deparmen of Labor o modify federal overime-eligibiliy rules, including he “salary hreshold”󲀔he amoun of weekly earnings a worker has o earn before he or she no longer qualifies for guaraneed overime righs. Modernizing overime rules would resore he basic  American promise ha workers who work exra hard deserve exra pay. Tis issue brief finds ha:Te overime-salary hreshold’s real value has declined by more han half since is peak in 1975. Par of his is because of he failure o adjus i for inflaion, bu i is also  because of a radical rule change in 2004 ha placed he overime-salary hreshold a  jus $455 per week󲀔well below previous hreshold changes in real erms, which were a leas $800 per week in inflaion-adjused dollars and above he average wage.
1
Te inadequae 2004 overime-hreshold change and he failure o raise i since have placed overime righs on he brink of exincion: 47 percen of full-ime workers’ salaries guaraneed hem overime righs in 1980. oday, his is rue for only 18 percen of workers.
2
 No workers will have guaraneed overime righs by 2030 if curren rends coninue.
 
2 Center for American Progress | America’s Incredible Shrinking Overtime Rights Need an Update
Te curren salary hreshold of slighly more han $23,600 essenially equals he fed-eral povery hreshold.
3
 By definiion, he righ o overime pay for overime work no longer exiss for he American middle class.Te Deparmen of Labor should raise he salary hreshold o a leas $960 per  week󲀔approximaely $50,000 per year󲀔roughly is 1975 level.
4
 U.S. real gross domesic produc, or GDP, and worker produciviy have only grown since he 1970s, and as a resul, we can well afford o gran workers he same overime righs ha hey had in 1975.
 The salary threshold: The only guarantee of extra pay for extra work
Te Fair Labor Sandards Ac, or FLSA, of 1938 esablished he firs federal minimum  wage and required ha employers pay overime󲀔1.5 imes he hourly wage for any  work beyond 40 hours per week󲀔wih an exempion for managerial and adminisra-ive saff. Te FLSA gives he Deparmen of Labor he power o define who is overime exemp, a power i has exercised a oal of six imes.
5
oday’s basic overime-eligibiliy framework daes back o 1950.
6
 Overime-exemp employees mus make more han a cerain amoun per week󲀔he salary hreshold󲀔and hen mus saisfy a duies es, which is a se of managerial, adminisraive, or pro-fessional asks ha an employee mus perform, such as supervising oher workers and exercising independen judgmen.
7
 Conrary o popular belief, overime rules apply jus as much o salaried workers as hey do o hourly workers. If an employees fixed salary falls below he salary hreshold or he employee does no mee he duies es for over-ime exempion, hen he employer mus pay he salaried worker 1.5 imes he hourly  wage for work ha exceeds 40 hours per week.In 2004, he Bush adminisraion modified he overime rules by raising he salary hreshold and changing he duies es. Boh employee and employer groups criicized he new duies es because i obscured which workers were overime exemp. Te U.S. Chamber of Commerces direcor of labor policy a he ime called he rules “so compli-caed, even he bes-inenioned employer has a hard ime being in compliance.
8
I is easy o see why. An employer can classify a fron-line reail supervisor or fas-food assisan manager as an exemp “execuive” as long as he or she has he “primary duy of managing”󲀔no percenage breakdown is given󲀔supervises a leas wo employees, and he employer considers his or her personnel suggesions.
9
 Tis so-called execuive may spend mos of his or her ime socking shelves or aking orders while acually earning less han he minimum wage on an hourly basis because he or she works 60 hours per  week on a fixed weekly salary.
 
3 Center for American Progress | America’s Incredible Shrinking Overtime Rights Need an Update
Te ease wih which employers can󲀔inenionally or no󲀔misclassify workers hrough he duies es makes he salary hreshold he only way o guaranee workers he righ o exra pay for exra work.
 The salary threshold’s infrequent updates and the Bush administration’s inadequate update
Unforunaely, hese guaraneed overime righs have performed an exraordinary disappearing ac over he pas hree decades. Te salary hreshold has never been linked o inflaion, and he Deparmen of Labor has raised i only a oal of hree imes since 1950. (see able 1) Irregular hreshold raises󲀔and one inadequae raise󲀔have caused is curren value󲀔$23,660󲀔o be less han half of is 1975 value󲀔$51,177󲀔even hough American workers are more producive
10
 and work longer hours oday.
11
TABLE 1
Overtime-salary-threshold changes since 1950 (in 2013 dollars)
 Weekly salary thresholdAnnualized salary thresholdAverage annual wage
1950 $844.69 $43,924 $25,2471959 $874.49 $45,473 $31,5211975 $984.18 $51,177 $38,7432004 $561.12 $29,178 $40,259
Source: Lawrence Mishel and others,
The State of Working America, 12th Edition
 (Washington: Economic Policy Institute, 2012), Table 4B, available at http://www.epi.org/files/2012/swa-chapter-data/SWA-Figures-Chapter-4-Wages.xlsx; Ross Eisenbrey and Jared Bernstein, “New inflation-adjusted salary test would bring needed clarity to FLSA overtime rules” (Washington: Economic Policy Institute, 2014), available at http://www.epi.org/publica-tion/inflation-adjusted-salary-test-bring-needed/; Bureau of Labor Statistics,
CPI-U-RS All Items
 (U.S. Department of Labor), available at http://www.bls.gov/cpi/cpiursai1978_2010.pdf (last accessed May 2014).
FIGURE 1
The salary threshold has fallen dramatically since 1975
Annual salary threshold (in constant 2013 dollars)
 1950196019701980199020002010$50,000$40,000$30,000$20,000$10,000$0
Source: Ross Eisenbrey and Jared Bernstein, “New inflation-adjusted salary test would bring needed clarity to FLSA overtime rules” (Washington: Economic Policy Institute, 2014), available at http://www.epi.org/publication/inflation-adjusted-salary-test-bring-needed/; Bureau of Labor Statistics,
CPI-U-RS All Items
 (U.S. Department of Labor), available at http://www.bls.gov/cpi/cpiursai1978_2010.pdf (last accessed May 2014).

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