New Overtime Protections - Would You Be Impacted?

- Nate Miller, research intern

You may have noticed in the news that the Obama administration has been pushing to revisit overtime pay rules. In light of the Great Recession and in hopes of rebuilding the nation’s economy, many are looking to put more money in the pockets of citizens and recognize the positive impact this will have on the overall economy. While federal pushes to increase the minimum wage have been blocked by Congress, and leading many states and localities to do it themselves, a change to overtime rules have the chance to positively impact even middle income employees.

As current rules stand, employers are required to pay their workers 1.5 times their hourly rate for each additional hour they work past their 40th hour within 168 hours (or seven 24-hour periods). However, there are exceptions to this rule. If someone is paid a salary, makes more than $455 per week (a little less than $24,000 a year, which is below the poverty line for a family of four), and works as a “bona fide executive, administrative, professional and outside sales employee”, they are not required to be paid for any amount of time past their 40th hour besides their salary. This has led to many cases where those who are managing a number of employees are being paid less than the employees they oversee, or even less than minimum wage.

 Despite these rules being written in the 1970’s, they have only been reviewed and changed once by the Bush Administration in 2004 to its current level of $455 per week. The rule changes sought by the Obama Administration nearly doubles that for somewhere around $42,000 to as much as $52,000 per year, which means a significant number of Americans could see some sort of change.

This, of course, leads to the question, “how many people will see a change in Wisconsin?” To answer it, we looked at the Department of Labor’s Bureau of Labor Statistics for Wisconsin (here’s a list of all the jobs in Wisconsin by category). After adding up the total number of jobs that could be affected and calculating the percentage of people who earn between the new numbers, we estimate that between 300,000 and 400,000 Wisconsinites could see a change in their pay schedule.

But what does it mean to have a change in pay schedule? CNN Money outlines four ways: 1) you will start being paid overtime, 2) you will get a small raise, 3) your hours will be limited, or 4) you could have your pay cut.

Number of Qualifying Jobs in Wisconsin

981,160

Mean Annual Income

$60,099

Number of Jobs Affected in Wisconsin

296,000-401,000

So why does this matter? While a lot of attention has been made on the lowest rung of the economic ladder and the need for raising the minimum wage, we need to ensure that those with middle incomes who are driven to work beyond 40 hours are also compensated fairly and can drive their wages back into the local economy. If a business wants to cut corners and have two employees work 60 hours/week each instead of three employees each working 40 hours/week each then we are hurting our families by keeping us at work and our economy by leaving some people needlessly unemployed. This is just as destructive as paying people too little to sustain the local economy, as it leads to both overworked and unemployed people in our communities.

We can fix this imbalance. This correction could ensure that thousands are made to work a more fair schedule, while those that choose to work overtime can earn that economy boosting wage that allows them to reinvest it back into their local economy. Whether it be car repairs, paying dental bills, home improvement or dinner with the family; putting more money into people's’ pockets, making work pay, lifts us all up.

- Nate

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