On Wednesday, the U.S. Department of Labor (DOL) raised the salary threshold under which working people can earn overtime pay. Under the new rule, effective December 1 of this year, most salaried workers – including managers and professionals – making less than $47,476 will now be entitled to overtime pay (most charitable non-profits will be unaffected by this rule change – read more here).
The Economic Policy Institute estimates this change will directly benefit just under half a million Pennsylvania workers or 22.6% of the commonwealth’s two million salaried workers.
Make no mistake, this is a huge win for middle class workers. Honestly I have trouble identifying another recent policy change that so clearly benefits middle income workers.
The reason this new policy will lift up families is because some salaried employees who regularly work overtime will get raises as employers find it more cost effective to raise their pay above the $47,476 threshold rather than pay overtime. Other employers, rather than pay overtime, will respond to this rule change by hiring more staff. So some workers will see higher pay, others will work fewer unpaid hours.
The key fact to remember is that, before this change, the threshold income for requiring salaried workers to be paid overtime was a salary under $23,660. Had the threshold kept pace with its 1975 level it would be $52,000 today. Allowing the threshold to fall by more than 50% removed overtime protections for millions of workers.
This change drives home the larger point that policymakers can change the rules governing our job market to bring back the middle class – even though they have too often done the opposite for 40 years.
Now it’s time for Pennsylvania’s General Assembly to build on President Obama’s effort to lift up working families by raising the Pennsylvania minimum hourly wage. That could give another 1.2 million Pennsylvania workers a raise by the end of the year.
Finally, for the policy geeks and groupies (what, it could happen?) out there, you may have heard that on June 8th and 9th we are organizing a conference. Well, you are in for a treat, as Dr. Heidi Shierholz, chief economist of the U.S. Department of Labor who helped develop the new overtime rule, will be speaking at the Crowne Plaza in Harrisburg on the afternoon of June 9. Dr. Shierholz is part of an all-star lineup of some of the best and brightest minds working towards building an economy that works for everyone! Register online here.