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Obama Plan Could Mean Overtime Pay for Millions

President Obama wants to make millions of Americans eligible for overtime pay. Just how many millions will come down to the details of his proposal.

Companies have to pay most hourly workers time-and-a-half for any work over 40 hours a week. But many salaried employees don’t qualify for overtime if they earn at least $455 per week, or about $24,000 per year. (California and New York set the bar higher.)

Obama on Thursday ordered the Labor Department to change that threshold for the first time in a decade. It isn’t clear what the new threshold will be — Obama asked the labor secretary to come up with a plan — but the left-leaning Economic Policy Institute has proposed $970 per week, or about $50,000 per year.

How many people would be affected by such a change? Nearly 9 million U.S. workers in any given week would become newly eligible for overtime pay.

According to data from the Current Population Survey, about 46 million Americans in 2013 earned weekly salaries more than the current threshold but less than $970. In any given week, 8.6 million of them worked unpaid overtime. (That figure takes into account the higher thresholds in New York and California.) There’s no easy way to know how much overlap there is in who worked overtime from one week to the next, but it’s a safe bet that more than 9 million people would qualify for paid overtime at some point during the year.

The Economic Policy Institute’s proposal would have the biggest impact on a smaller group of workers who routinely work unpaid overtime but earn less than $970 per week. That’s about 6.1 million people, according to the Current Population Survey.

Where the administration ends up drawing the line makes a big difference. Set the bar at $900 per week instead of $970, and the group of most affected workers shrinks to 4.8 million. Raise it to $1,050, and nearly 7 million would routinely qualify for overtime pay.

Of course, there’s no guarantee all those workers would actually see their paychecks rise. Right now, companies are getting extra labor for free. If the threshold rises, companies might limit salaried workers’ hours rather than pay them extra.

Ben Casselman is a senior editor and the chief economics writer for FiveThirtyEight.

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