The Labor Department May Have Just Given You A Raise
The Obama administration might have just given you a raise. If you're like the typical millennial worker, spending your days at an office for less-than-ideal pay, then you're in luck. I'm not talking about a $15 minimum wage — many millennials already make that. Instead, this change will have an impact on entry-level white collar workers who make a salary. The rule could have huge effect on recent college grads and everyone working for less than $47,476 a year. The Department of Labor announced Tuesday it has finished the reform to extend overtime protections to millions of additional workers.
The huge economic reform, perhaps one of the biggest of Obama's administration, is centered on one number: the overtime salary threshold. Before this change took place, that number was just $23,660, set by George W. Bush. That means anyone who was salaried and made more than that was exempt from overtime. Back in the 1970s, overtime covered about 62 percent of salaried workers; today it's a mere 7 percent. If the overtime threshold had kept up with inflation, it would now be $52,000.
Now the threshold has more than doubled from the one set by Bush. That should make at least 4.2 million more workers eligible to take home time-and-a-half pay whenever they work more than 40 hours a week. So no more nights spent at the office until 11 p.m. when a project is due — unless, of course, the boss is willing to cough up the extra money. The Labor Department estimates that about 35 percent of salaried full-time workers will now be covered.
Many of those will be millennials. As you've I'm sure read, the average worker aged 25-34 makes less now than in 2000 — let alone back when your parents were your age in the early '80s. The median annual earnings of a millennial worker was just $35,000 for men and — hello, wage gap — an even worse $30,000 for women as of 2013. Even in places like New York, where wages are generally higher, the median worker aged 16-34 will still be covered by the overtime law.
Obama made the change via an executive action, and it will likely be one of the last ways he has to try to push wages higher and bolster the middle class. Vice President Joe Biden gave a press conference trying to sell the plan to reporters: "The middle class is getting clobbered. If you work overtime, you should actually get paid for working overtime." He said whether companies pay the overtime or let workers leave early, "the workers win."
Labor Secretary Thomas Perez said that the original threshold was designed to exempt well-compensated executives, but has instead hurt low-paid retail supervisors and entry-level office workers, who spend about 50-70 hours a week on the job. The work that many perform now in overtime will likely be redistributed to other workers. Goldman Sachs economists estimated that it could also add about 120,000 new jobs within the next year, although most would be lower-paid hourly wage earners.
Whatever the effect on the job market, there's no doubt that millennials will be big among the big winners. In 2013, 41 percent of full-time salaried workers aged 25-34 made less than $50,440. And among 16-to-24-year-olds, a full 70 percent made less than that. Nearly all of these workers can expect take-home pay to go up — and if not, free time is pretty great too.