Where Did the Time Go? A Deep Dive into Overtime

The Pitch: Economic Update for April 14, 2022

Friends,

Does it feel like you’re working harder and for longer hours than your parents and grandparents did—in exchange for a smaller paycheck? Does the basic American workplace standard of a 40-hour workweek feel like a relic of the past to you? Has your work-life balance gradually eroded to the point that you’re pecking away at work emails on your phone at weekend family functions?

You’re not alone. This erosion of your time isn’t just in your head—it’s the reality for a majority of salaried Americans. In the 1970s, more than six out of ten salaried workers earned time-and-a-half overtime pay for every minute they worked over 40 hours in a week, and in practice that means fewer people stayed late or took work home. But in the decades since, our leaders failed to keep the overtime threshold up to date—the salary level at which you’re legally entitled to earn overtime pay—and now just over one in ten salaried workers qualify for overtime.

Except for raising the federal minimum wage, restoring overtime protections is quite likely the single most important thing our leaders can do  to grow the paychecks of American workers, and that’s why I’m devoting this special edition of The Pitch entirely to overtime: Because we need as many people as possible to understand how they’ve been affected by diminished overtime protections, and what you stand to gain when those protections are restored.     

Why Your Time Counts

Make no mistake: The weakening of overtime protections was a choice made by people in power, and it has hurt the work-life balance for all Americans. As trickle-down politicians suppressed the overtime threshold over the course of decades, employers took advantage of that growing regulatory gap by slowly increasing the duties and responsibilities of their workers—to the point that the average salaried American worker now clocks in just shy of 50 hours a week. The worst part is that without overtime protections, employers are pulling that extra nine hours out of your life in exchange for absolutely no extra pay. Many of the workers who fall just above the current annual overtime salary threshold of $35,568 are likely earning less than minimum wage when you average that unpaid time into their weekly paychecks. 

Created as part of the same Fair Labor Standards Act that established the very first federal minimum wage, overtime was a crucial part of the basic contract between American workers and their employers. It was essential to reinforcing the idea of a 40-hour workweek, which gave Americans enough time to be with their families and spend time in their communities. We had time in the evenings to help our kids with their homework, and time on the weekends to spend leisure time with friends. 

And employees who did pick up overtime shifts were compensated at time and a half for their extra hours at work. Some workers were always eager to volunteer for additional hours, knowing that their larger paychecks would go toward Christmas gifts or the big summer vacation the kids have always wanted. Whether they took the extra time or the extra money—or, most likely, some combination of the two—it seems likely that without strong overtime protections, the American middle class as we know it would never have existed. 

Raising the bar by restoring protections

The good news is that raising the overtime threshold isn’t a huge political lift. While President Biden has been a loud and committed advocate of the $15 federal minimum wage, the Senate hasn’t been able to find enough votes to follow through on raising the wage. Increasing the overtime threshold doesn’t require the same kind of political maneuvering; President Biden’s Department of Labor, headed up by Secretary Marty Walsh, can simply change the rule.

There are potential hurdles, of course. In his last year in office, President Obama’s Department of Labor raised the threshold to roughly $47,500 and established an automatic increase to the threshold every three years thereafter, but a federal judge struck down the new threshold and President Trump’s Department of Labor declined to appeal the ruling, effectively killing a protection that would have benefitted millions of American workers. Many lawyers believe that Judge Mazzant’s opposition to the new threshold was overly broad, and that the ruling would have been overturned on appeal.

So what should the threshold be today? If the Biden Administration wanted to return the overtime threshold to its strongest point, when it covered six out of every ten salaried workers, they could double the current threshold, landing at an annual salary of about $83,000 by 2026. And it would make sense for the Department of Labor to adopt the Obama Administration’s call for automatic increases to the threshold on a regular basis, so that the protection doesn’t continue to suffer from erosion with each passing year. 

What would this mean for you?

So let’s say the Biden administration restores overtime protections, and you fall within the new threshold. If your boss had a task that required additional work outside the 40-hour timeframe, they’d have three options.

1. They could ask you to work overtime, and you’d be paid time-and-a-half in additional pay for every hour you work over 40 hours. You might lose some sleep and some personal time, but you’d be compensated for it.

2. They could raise your pay so that you fall above the overtime threshold, which would mean they wouldn’t have to pay you overtime but you’d be making a higher salary. Or:

3. They could hire more employees to do the work within 40 hours a week, meaning you get your time back and the workload is more evenly distributed among a higher number of workers.

I’m sure you’ll agree that any of those three options are positive outcomes—not just for you, but for the economy as a whole. Either you have more money to spend, or you have more time to spend with family and friends. 

And option three raises an important point that doesn’t get discussed because it’s virtually impossible for economists to measure. Because the average salaried employee in America works 49 hours a week, that means that for the last four decades, employers have been squeezing the work of five full-time employees out of every four employees. That’s a lot of jobs that have been extracted from the economy through your unpaid labor. Restoring overtime protections creates jobs, in addition to giving you your life back.

This isn’t some onerous regulation that ties up employers in red tape—in fact, it technically doesn’t require employers to pay their employees an extra cent. It just stops bad employers from exploiting their workers’ time and value, which is why we have regulations in the first place. 

A minimum-wage increase for the middle class

There’s a reason why Nick Hanauer calls the overtime threshold “the minimum wage for the middle class.” Like the minimum wage, overtime is an economic cornerstone that establishes a bare minimum protection for workers. It ensures that your time is your own, and it sets a minimum value for your time as a salaried professional. 

It is no coincidence that when the American middle class was at its strongest, so too were our overtime protections. And as the overtime threshold has been chipped away, so has our middle class. By restoring overtime, we’d give a much-needed raise to millions of salaried workers and restore the great American middle class. 

In the 1960s and 1970s, the American economy was strong and the middle class was thriving. People were compensated for their time, so they had more money to spend in their communities, and their free time was protected, so they had time to spend in their communities—to attend night school, or to start a small business out of their garage. Economists tend to forget that your free time has economic value, too; the economy thrives when more people have time to participate fully in their economy. 

The overtime threshold has traditionally been an aspirational number, the kind of white-collar salary at which you could afford a house, a car, and a family. Americans have always valued working hard, but we also believe that hard work should be rewarded. That’s what the overtime threshold is about—just as the minimum wage should ensure that anyone who puts in the time and effort can afford to live in America, so the overtime threshold ensures that the American Dream is in reach for every middle-class worker. 

Be kind. Be brave. Get vaccinated—and don’t forget your booster.

Zach