Overtime Proposal Misses the Mark

By July 27, 2015Human Resources

On July 6, the Department of Labor proposed a new income threshold to determine who would be eligible to receive overtime pay. The current threshold of $23,660 a year, or $455 per week, has been in place since 2004 and we have to go back to 1975 in order to look at the time before that. In total, the income threshold for overtime has been increased seven times since it was first implemented in 1938. It has never been indexed to inflation, wage rates, or any measure. The threshold being proposed would increase to $50,440 a year, or $970 per week, and then indexed to either the 40th percentile of all salaried employees, or to the Consumer Price Index (CPI-U). If the $50,440 figure strikes you as a bit high and wide of the strike-zone, you would be right. In the chart below, you can see why.

What the chart illustrates is what four of the six income thresholds would be if they were indexed by the CPI-U from the date they went into effect until today. It’s very clear that the $50,440 figure the administration is pushing is far beyond what anyone as far back as Franklin Delano Roosevelt in 1938 had contemplated for the income threshold. What the chart shows is that if you pegged the original overtime income level to CPI, it would equal $26,286. If you believe that is too low, let’s take the 1975 figure of $8,060 per year. Even that figure of $36,625 would be far below the $50,440 level proposed earlier this month. In fact, if you were to take each of the four income thresholds since 1938 included in the chart and average them out, it would give you an annual salary of $32,537. Again, well below the $50,440 proposed by the Department of Labor.

 

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