THE IDEA that workers should get time and a half pay for overtime — that is, a 50 percent boost in hourly pay for any hours they put in past 40 per week — has been embedded in U.S. law since the New Deal. Less easy to establish, though, have been the precise criteria to determine who’s eligible and who’s not. The country’s roughly 75 million hourly workers are automatically included. For the rest of the country’s employees, however — those who get salaries — eligibility for overtime has been defined two ways: in terms of total pay and in terms of job content. At present, salaried workers are exempt from mandatory overtime if they make $23,660 per year or more, or (to oversimplify a complex rule) if their jobs contain even a modest degree of professionalism, authority or other “white collar” attributes. Those criteria were last adjusted 11 years ago during the George W. Bush administration.
President Obama has committed to updating those Bush-era standards as part of his push to fight inequality and boost the middle class. Republicans and business leaders are resisting, arguing that more mandatory overtime pay will raise costs and kill jobs. The pushback may help explain the Labor Department’s delay in publishing a proposed regulation, though we’re told it’s due any day. When it finally arrives, expect plenty of hyperbole, both pro and con.
The truth is that at most 10 million workers would be directly affected if the government roughly doubled the current eligibility threshold to $51,000 or so, as progressive advocates are urging Mr. Obama to do. That’s neither a panacea for inequality nor a menace to employers, especially since much of the effect would be to compensate for past inflation. Still, like any wage rule, this one does pose trade-offs and could have unintended consequences. Research suggests these would be modest; mainly, employers would probably have to share available work among more workers. But the impact of changes in overtime rules has been much less thoroughly studied than the minimum wage itself, in part because it has not been adjusted as often.
An upward adjustment in a salary threshold that hasn’t increased since 2004 (the last increase before that was in 1975) hardly seems precipitous. The main goals of any new policy, however, should be to increase the degree to which overtime eligibility is determined by objective criteria — such as income — and to decrease the role of subjective criteria — such as job duties. The former clarify standards, the latter make them fuzzier and subject to litigation. Old distinctions between blue- and white-collar work are swiftly eroding in today’s knowledge-based service economy. A modern federal labor policy should reflect that fact.