Unrigging the economy to grow the middle class: Pennsylvania takes the lead on overtime

Yesterday, Pennsylvania Governor Tom Wolf became the first state executive to take action to provide workers overtime protections that help guarantee fair pay for hard work, since a 2016 federal rule to do this at the national level was blocked in the courts by corporate interests. As part of his “Jobs That Pay” initiative, Wolf proposed a state rule change that will modernize the state’s overtime policies, providing new or strengthened overtime protections to 460,000 more middle-income workers by 2023 and ultimately putting close to $53 million more each year into Pennsylvanians’ paychecks.

The Keystone Research Center (KRC), a member of the Economic Analysis and Research Network (EARN), advocated for the Wolf administration to take this action. Stephen Herzenberg, KRC economist and executive director, applauded Wolf’s leadership.

On overtime pay, the governor has authority to act without the state legislature. On another vital measure to improve the lives of working families, raising the minimum wage, legislative action is required—and Pennsylvania still lags its neighboring states. Unlike these six contiguous states, the Pennsylvania legislature has failed to increase the minimum wage above the federal level of $7.25.

Nationally, millions of low- and moderately-paid working people are working overtime but not getting paid for it. Federal law guarantees certain workers overtime pay, meaning when they work more than 40 hours in a week they get 1.5 times their regular pay for the extra hours. This guarantee applies automatically to salaried workers making below a specified income threshold, because detailed studies of job duties show that most lower-paid salaried workers do not perform sufficient executive, “administrative,” or professional duties required by federal law to be exempt from overtime. But as the federal government has failed to update this income threshold over the last few decades, it had been allowed to erode dramatically with inflation.

As a result, the percentage of full-time salaried workers who are automatically eligible for overtime based on their pay dropped from more than 60 percent in 1975 to less than 7 percent in 2016. Recognizing the problem this caused, the Obama administration undertook a lengthy regulatory process to increase the threshold to $47,476 annually and to automatically increase it every three years thereafter. If this rule had not been blocked, the new income threshold would have resulted in 33 percent of full-time salaried workers being automatically eligible for overtime based on their pay.

The Obama administration’s overtime regulations would have provided new or strengthened protections to 12.5 million more U.S. workers. While the Trump administration appealed the Texas court decision to protect its authority to set an overtime standard, it failed to fight for the $47,476 salary threshold that was established through careful economic analysis in the 2016 rule. Under federal law, therefore, it remains legal for companies to force many low-paid salaried employees to work many hours above a 40 hour workweek—for free.

Similar to other areas of economic policy vital to working families—such as the minimum wage, but also paid family and medical level and paid sick leave—Washington is unlikely to adequately address the problem of exploited low-paid McDonald’s supervisors, Walmart department heads, and office managers. Now, more than ever, the solutions will arise from states and cities. EARN partner organizations across the country are joining with allies and state officials to take the lead on improving the wages and lives of working families. In the absence of effective federal action on behalf of working people, state leaders are the best hope for presenting a vision and a road map for improving the economic prospects of all Americans.