The impact (or not) of the new overtime rules

We have discussed the Obama Administration's new overtime rule. It will significantly raise the pay threshold that triggers exceptions to the general rule that entitles workers to time-and-a-half for every hour they work over 40 per week. We also posted about holes in the overtime rules that exempt various workers entirely.

Now, this article by Natalie Kitroeff says that the new rule "probably won’t have much of an economic effect, partly because employers will find legal ways of getting around it." She explains:

The new rule sounds dramatic. Starting in December, anyone who is a salaried worker and makes less than $47,476 must be paid time and a half for any work beyond 40 hours a week. For the last decade, only people who made less than $23,660 automatically had to be paid overtime. Anyone who made more than the threshold and performed executive or administrative tasks at work was exempt from overtime. . . . The White House estimates that 4.2 million people will become eligible for overtime compensation under the rule, and that it will push wages up by $1.2 billion a year for a decade. But about 60% of the 4.2 million workers who will now be eligible for overtime do not work any overtime hours, meaning employers won’t change their pay because of the new rule, the U.S. Department of Labor found. So only the remaining 1.7 million workers will get a raise, about $718 a year on average.

Kitroeff goes on to discuss whether employers will respond by cutting hours so that fewer workers are working over 40 hours a week (or at least not much over 40 hours per week) or even by cutting workers' base pay.

Leave a Reply

Your email address will not be published. Required fields are marked *