Increasing wages

Robert Reich

This is a big deal: Because of a new regulation issued today by the Labor Department, over 13 million workers will get a raise. Most salaried workers earning up to $47,476 a year will receive time-and-a-half overtime pay when they work more than 40 hours during a week. The previous cutoff for overtime pay, set in 2004, was $23,660.

Background: Overtime was enacted in 1938 to overcome a basic problem in the labor market: The longer and harder we work for the same wage, the fewer jobs there are for others, the higher unemployment goes and the more we weaken our own bargaining power. This helps explain why over the last 30 years, corporate profits have doubled from about 6 percent of gross domestic product to about 12 percent, while wages have fallen by almost exactly the same amount. The erosion of overtime and other labor protections is one of the main factors leading to worsening inequality. A higher threshold would help reverse this trend.

Under the restored salary threshold, employers would have a choice: They could either pay you time-and-a-half for your extra hours worked, or they could hire more workers at the standard rate to fill your previously unpaid hours. The former would grow your paycheck. The latter would increase your leisure time while directly adding more jobs to the economy. Either would be great for workers and great for economic growth.

The rule goes into effect on Dec. 1 -- although Republicans in Congress have vowed to pass legislation between now and then to stop it. President Obama deserves a lot of credit for taking this on.

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