As I explained here yesterday, and Ross Eisenbrey explain in some detail in this longer analysis, the Obama administration is making the right move by proposing to increase the weekly threshold beneath which salaried workers automatically quality for overtime pay. Ross and I explain the rationale in the links above, but the figure below shows just how low the current threshold is in historical terms, meaning it entitles far too few salaried workers to OT pay when their workweek exceeds 40 hours.
The figure just takes the OT threshold in each year it was raised since 1950 and put it into today’s dollars. For example, in 1970, the threshold was raised from $150 to $200, and $200 in 2014 dollars amounts to just under $1,100. Today’s threshold, set in 2004, is $455, which btw is about the poverty rate for a family of four.
If we were to update that threshold to today’s dollars, it would be about $560, or about $29,000 per year. That means that if we simply updated the current threshold for inflation, we’d still risk misclassifying, for example, an assistant manager at a retail outlet who makes $30,000 a year and has few true managerial or supervisory duties as ineligible for overtime pay.
Prior to the low-ball update in 2004, the average threshold in today’s dollars is $950, just about where Ross and I suggest it be set today (we advocate for the 1975 threshold in today’s dollars; see the second link above).
Just a few hours ago the President announced the official beginning of the process to update the rules and, in particularly, the threshold. Thus begins the comment period where stakeholders et al can weigh in. Consider this graph an early, and at least to my eyes, persuasive comment.
Source: EPI. Each bar represents the FLSA OT threshold in the year listed, but in today’s dollars.