Whatever Happened to Overtime?

Nick Hanauer is a Seattle-based entrepreneur.

http://www.politico.com/magazine/story/2014/11/overtime-pay-obama-congress-112954.html

By NICK HANAUER
November 17, 2014

If you’re in the American middle class—or what’s left of it—here’s how you probably feel. You feel like you’re struggling harder than your parents did, working longer hours than ever before, and yet falling further and further behind. The reason you feel this way is because most of you are—falling further behind, that is. Adjusted for inflation, average salaries have actually dropped since the early 1970s, while hours for full-time workers have steadily climbed.

Meanwhile, a handful of wealthy capitalists like me are growing wealthy beyond our parents’ wildest dreams, in large part because we’re able to take advantage of your misfortune.

So what’s changed since the 1960s and '70s? Overtime pay, in part. Your parents got a lot of it, and you don’t. And it turns out that fair overtime standards are to the middle class what the minimum wage is to low-income workers: not everything, but an indispensable labor protection that is absolutely essential to creating a broad and thriving middle class. In 1975, more than 65 percent of salaried American workers earned time-and-a-half pay for every hour worked over 40 hours a week. Not because capitalists back then were more generous, but because it was the law. It still is the law, except that the value of the threshold for overtime pay—the salary level at which employers are required to pay overtime—has been allowed to erode to less than the poverty line for a family of four today. Only workers earning an annual income of under $23,660 qualify for mandatory overtime. You know many people like that? Probably not. By 2013, just 11 percent of salaried workers qualified for overtime pay, according to a report published by the Economic Policy Institute. And so business owners like me have been able to make the other 89 percent of you work unlimited overtime hours for no additional pay at all.

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To get the country back to the same equitable standards we had in 1975, the Department of Labor would simply have to raise the overtime threshold to $69,000. [Other sources say that President Obama's current (July 2015) raising the threshold to $50,400 would take us back to the 1975 level, adjusting for inflation. But benefits have been reduced for many people, so maybe this author takes that into account.] In other words, if you earn $69,000 or less, the law would require that you be paid overtime when you worked more than 40 hours a week. That’s 10.4 million middle-class Americans with more money in their pockets or more time to spend with friends and family. And if corporate America didn’t want to pay you time and a half, it would need to hire hundreds of thousands of additional workers to pick up the slack—slashing the unemployment rate and forcing up wages.

The Obama administration could, on its own, go even further. Many millions of Americans are currently exempt from the overtime rules—teachers, federal employees, doctors, computer professionals, etc.—and corporate leaders are lobbying hard to expand “computer professional” to mean just about anybody who uses a computer. Which is almost everybody. But were the Labor Department instead to narrow these exemptions, millions more Americans would receive the overtime pay they deserve. Why, you might ask, are so many workers exempted from overtime? That’s a fair question. To be truthful, I have no earthly idea why. What I can tell you is that these exemptions work out very well for your employers.

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But here’s a little secret from the corner office: The arguments that the corporate lobbyists are making—about how badly business will be hurt—just don’t add up. What is adding up instead is the trillions of dollars in corporate profits and stock gains that corporations have made over the same decades that your hours climbed and your wages fell. From 1950 to 1980, during the good old days of U.S. economic might—the era in which the Great American Middle Class was created—corporate profits averaged a healthy 6 percent of GDP. But since then, corporate profits have doubled to more than 12 percent of GDP.