Progressives are angry at the president for caving in to Republicans on the CRomnibus budget bill, and rightly so—the rollback of post-Great Recession regulations on financial derivatives is simply inexcusable. But there is a way for President Obama to win back his party’s base with a bold strike on behalf of the middle class: Raise the overtime pay threshold.
Overtime pay is to the middle class what the minimum wage is to low-wage workers. In 1975, more than 65 percent of salaried American workers earned time-and-a-half pay for every hour worked over 40 hours a week, but by 2013, that number had dropped to less than 11 percent. That’s because the income threshold at which employers are required to pay overtime has been allowed to erode to only $23,660 a year, less than the poverty line for a family of four. The 89 percent of salaried workers who now earn over that threshold can be forced to work unlimited overtime hours for no additional pay at all.
But it doesn’t have to be this way: President Obama could raise the overtime threshold to $69,000—enough to cover the same 65 percent of salaried workers that it covered 40 years ago—and with no prior congressional approval. Because unlike the minimum wage, the overtime threshold is set through the Department of Labor’s existing regulatory authority.
Just think about it: With the stroke of his pen, President Obama could force your employer to pay you time-and-a-half for every hour you work over 40 hours a week. And if corporate America didn’t want to pay you time-and-a-half, they would need to hire hundreds of thousands of additional workers to pick up the slack—slashing the unemployment rate and forcing up wages. That’s 10.4 million middle-class Americans with more money in your pocket or more time to spend with your friends and family.
But the Obama administration could go even further. Many millions of Americans are currently exempt from the overtime rules—teachers, federal employees, doctors, computer professionals, etc.—and corporate leaders are lobbying hard to expand “computer professional” to mean just about anybody who uses a computer. Which is almost everybody. But were the Labor Department instead to narrow these exemptions, millions more Americans would receive the overtime pay they deserve.
So you see, when I say that the overtime threshold is the minimum wage for the middle class, I’m not just playing with words. In the exact same way that the erosion of the federal minimum wage—from an inflation-adjusted peak of about $11 an hour in 1968 to only $7.25 an hour today—has held down wages for low-income Americans, the simultaneous erosion of the overtime threshold has also held down wages for the American middle class. And just like raising the minimum wage would nudge up incomes for those workers earning somewhat above it, restoring the overtime threshold would push up incomes for many workers currently earning above $69,000 too.
Faced with an obstructionist Republican majority in Congress, Obama has already proven his willingness to use what executive powers he has to move the nation forward on immigration. With the Labor Department already in the process of reviewing its outdated overtime rules, the president now has the perfect opportunity to assuage his party’s disgruntled progressive base by striking an equally bold blow on behalf of millions of overworked Americans.
Restore the overtime threshold, Mr. President, and restore the American middle class!
Hanauer is the author of “The True Patriot” and “The Gardens of Democracy.” He is a co-founder and partner in Seattle-based venture capital firm, Second Avenue Partners.