Employers could end up paying 6.1 million more workers overtime if the U.S. Department of Labor moves ahead with a proposal to change salary regulations to adjust for inflation, according to an analysis issued by a left-leaning think tank on Wednesday.
The influx of employees eligible for extra pay would be the result of DOL increasing the threshold at which businesses are required to give salaried workers overtime—moving from the current $455 per week to $984 per week to account for inflation, according to “Increasing the Overtime Salary Threshold Is Family-Friendly Policy,” a report from the Economic Policy Institute in Washington, D.C. Tasked this year by President Barack Obama to bring overtime pay to more salaried employees, the DOL has yet to say what the new salary threshold might be. Economists to the White House, however, have suggested the $984 threshold, which the Economic Policy Institute also backs.
The proposed threshold increase mostly would benefit blacks, Hispanics and women in the workforce, as well as workers who are younger than 35 years old or have limited education, according to the EPI study. These employees are more likely than other workers to earn less than $50,000 annually, which is the approximate salary of an individual who makes $984 weekly.
“It’s clear that the Department of Labor should raise the threshold to $984, or even higher, so that low-paid white-collar workers are treated fairly,” said EPI economist Heidi Shierholz, who authored the report.
In March, Obama issued an executive memorandum directing the DOL to “modernize and streamline the existing overtime regulations.” He said at the time that “Americans have spent too long working more and getting less in return.”
The DOL said in June that it plans to release a draft for new overtime regulations by November.
Businesses, and their lawyers, have expressed concerns with changing overtime rules.
J.D. Foster, the U.S. Chamber of Commerce’s deputy chief economist, wrote in a blog post in March that the Obama administration operates in a “magic land” where making more employees eligible for overtime would easily raise incomes and help the economy.
“In the real world, where the rest of us live and in particular where businesses must do business, make payroll and make a profit, the obvious effects of this new overtime regulation are quite different,” he wrote. “The most obvious effect is employers will be forced to hold back growth in all other forms of compensation including nonovertime pay scales for the affected employees.”