The Trump administration’s Labor Department issued new overtime rules this week that take away $1.4 billion of workers’ pay every year compared to the Obama administration rules they replace. The amount of this pay cut for working people will increase enormously over time.
Although the economic recovery that started in 2009 under then-President Obama is now officially more than 10 years old, workers’ wages are still barely budging. Something is clearly wrong with the economy. Workers are not getting our fair share of the profits we help produce.
The Obama administration tried to do something about this problem by making millions more workers eligible for overtime pay, restoring protections that have eroded in recent decades.
Instead of defending the Obama administration’s overtime rules against a poorly reasoned and seriously flawed district court decision, the Trump administration decided to replace them with a new set of rules that protect millions fewer workers.
The Obama rules would extend overtime eligibility to 3.2 million more workers than the Trump rules that replace them. In addition, the Obama rules would make it harder for businesses to misclassify millions of overtime-eligible workers—5 million more than the Trump rules.
The Obama rules would extend overtime eligibility to millions more workers by raising the salary threshold, which is used to determine which workers are eligible for overtime. Workers who earn less than the salary threshold are automatically eligible; so the higher the threshold, the more workers covered. Under the Obama rules, the threshold would be $51,000 in 2020. This would actually be a lower threshold than if you simply adjusted the 1975 level for inflation—which comes out to $56,500. By contrast, the Trump rules now set the threshold at only $35,568.
The Trump overtime rules also protect fewer and fewer workers every year as inflation eats away at the value of the salary threshold. The Obama overtime rules would put a stop to this constant erosion of overtime coverage by providing for regular automatic updates of the salary threshold. The Trump rules leave out this essential safeguard for working people. This is why the annual pay loss to workers of $1.4 billion in the first year alone will keep getting bigger every year.