Back to the future: overtime rules would raise salary limits from 1975

New overtime rules closer to reality this summer

Changes that would result in a substantial increase in the number of workers covered by overtime regulations under the Fair Labor Standards Act have moved a step closer to becoming law. The Department of Labor has sent a finalized version of the rules to the Office of Management and Budget (OMB) for its approval.

The White House wants the final rule to be released before a deadline in May that would allow Congress a say in the matter. Such interaction would likely result in an attempt to delay or otherwise interfere with the rule. It is also unlikely that Congress would act in a way that would benefit workers.

The rule would change the classification of workers who would be eligible for overtime by setting a new benchmark for minimum salaries of exempt employees. According to Think Progress, the overtime requirement has not been updated since the Ford Administration in 1975.

The new floor

The new minimum salary for exempt workers would be increased to $50,440, which represents a significant increase from the current standard of $23,660. Workers making less than the new minimum salary would be entitled to overtime for any hours worked that meet the FLSA requirements for overtime pay.

What is most surprising is that this new standard, while it appears to be a massive increase in salary for these workers, in reality, simply returns the pay requirement to its 1975 level.

75 percent fewer workers entitled to overtime

If nothing else, this one fact alone points out how badly workers have suffered during the last 40 years of wage erosion. As one site notes, since 1979, the number of workers who have been covered by the overtime rules shrank by 75 percent, with only 2.5 million covered today versus 12 million in 1979.

Employers were likely behind many of the 30,000 comments the DOL received when it proposed the new rule last year, with many complaining they cannot afford to pay overtime or to increase salaries. But their employees have long had to cope with the consequences of this disparity.

Again, if we examine the inflation-adjusted numbers from the 1970s and the new numbers chosen by the DOL, it's clear that this is no sudden windfall for employees. One report notes that strictly adjusting for inflation since 1975, the number should actually be higher at $58,344.

Too good for employers for too long; but not for the workers

Of course, for many businesses today, the profit model is built on the status quo. They expect to be able to pay workers a salary in the high-$20,000 range, call them a "manager," and work them 50 or 60 hours per week. Having to pay 20 hours of overtime or increase the base salary to above $50,000 certainly would be a shock.

However, it's necessary, as millions of workers have to take two or more jobs simply to pay all their bills. The exempt employee regulations of the FLSA have been manipulated for far too long by employers who simply want to extract maximum production out of employees while paying them as little as possible.

And despite all "the sky is falling" rhetoric of many employers in Florida and across the nation, if 5 million more workers experience a genuine increase in their standard of living, it could wind up leading to true "job creation." Many of those workers would have more income and might even have the time to go and eat out at a restaurant or buy other things.