The Case for Reforming Federal Overtime Rules: Stories from America’s Middle Class

America’s middle-class workers are spending more hours at work than ever before, and yet are still falling behind. The erosion of overtime pay is a key factor in the deterioration of middle-class wages and living standards.  Reform of the nation’s overtime rules is much needed and long overdue. The U.S. Department of Labor (DOL) has the authority to update regulations governing to whom overtime must be paid, and President Obama recently issued a Presidential Memorandum directing DOL to do just that. The stories of middle-class Americans that follow reveal how sorely needed an update is.

When the Fair Labor Standards Act (FLSA) was enacted in 1938, one of its most important provisions was premium pay for workers who put in more than 40 hours per week. Anything over that 40-hour threshold meant that workers were entitled to time-and-a-half their regular hourly wage.

The overtime premium was instituted for two primary reasons. First, one of the stated purposes of the FLSA was to protect employees from difficult working conditions that are “detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.”  Workers need leisure time for themselves, time to spend with their family, time for parenting, going to school, or enjoying other activities that help rejuvenate them from the stresses of work. Thus, overtime provides a financial incentive not to overwork employees, but when an employer nonetheless insists on long hours per week, workers then receive a wage premium that compensates them for working so hard.

Second, if there is so much work to be done that more than 40 hours per week from staff is regularly necessary to accomplish it, the overtime premium creates an incentive for employers to hire more people, rather than overworking their existing employees. This job-creation incentive is especially important during periods of high unemployment.