Obama overtime rule could raise wages for 5 million The threshold to qualify for overtime pay, now $23,660, will rise to $50,440.

President Barack Obama will this week propose giving millions of Americans a raise.

On Tuesday the White House will begin releasing the details of a long-awaited overtime rule aimed at lifting wages for up to five million people as soon as 2016, according to sources familiar with the plans. The president will announce the rule formally during a trip Thursday to La Crosse, Wisconsin.


The proposed rule would more than double the salary level under which virtually all workers qualify for overtime pay whenever they work more than 40 hours in any given week. That threshold, now $23,660, would rise to $50,440 — a number that the administration believes would encompass many workers now classified as managers—and would increase automatically in future years.

“In this country, a hard day’s work deserves a fair day’s pay,” Obama wrote in an op-ed published Monday evening by the Huffington Post — an outreach to the president’s base on the left. “That’s at the heart of what it means to be middle class in America.”

Meanwhile, the Chamber of Commerce, a major White House ally in the recent trade fight, is deeply opposed, with Randy Johnson, senior vice president of Labor, Immigration and Employee Benefits calling the rule “another example of the administration being completely divorced from reality and adding more burdens to employers and expecting them to just absorb the impact.”

The new threshold wouldn’t be indexed to overall price or wage increases, as many progressives had hoped. Instead, it would be linked permanently to the 40th percentile of income. That would set it at the level when the overtime rule was first created under President Franklin Delano Roosevelt.

“Without Congress, I’m very hard-pressed to think of a policy change that would potentially reach more middle class earners than this one,” said Jared Bernstein, a former economic adviser to Vice President Joe Biden who’s now a senior fellow at the Center on Budget and Policy Priorities.

The timing reflects an administration increasingly feeling the clock ticking: it expects the overtime rule to be challenged in court, and will press to complete by 2016 the review process during which comments are submitted by the public and then considered by the Labor Department and the White House as it prepares the final rule. If all goes according to plan, the rule will go into effect before Obama leaves office.

The proposed rule comes after months of pitched internal debate, with Labor Secretary Tom Perez and Domestic Policy Council director Cecilia Muñoz pushing to keep the threshold at the 40th percentile, and other members of the White House economic team, including Council of Economic Advisers chairman Jason Furman, trying to lower it to the 37th percentile.

Perez spent months conferring with business groups while his team wrote the rule. Obama made the decision to go forward in a meeting of his economic team several months ago, and originally the plan had been to roll out the rule last week. That was put on hold so that Obama could instead deliver the eulogy Friday at Rev. Clementa Pinckney’s funeral in Charleston, S.C.

For years the White House has faced the frustrating reality that despite consistently improving economic numbers, wages have been largely stagnant. Obama’s 2014 push to raise the minimum wage struck many middle class voters as not having much to do with them. But the overtime rule would affect workers whose salaries approach the median household income.

The regulation would be the most sweeping policy undertaken by the president to assist the middle class, and the most ambitious intervention in the wage economy in at least a decade. Administration aides warn that it wouldn’t always lead to wages going up, though, because in many instances employers would cut back employee hours worked rather than pay the required time-and-a-half. Even so, they say, the additional hires needed to make up for that time could spur job growth, and give existing workers either more time with their families or more opportunities to work second jobs and put more money in their pockets.

Former Communications Workers of America president Larry Cohen, still smarting from labor’s defeat on trade, called the rule a “good step forward,” but warned, “we need to do much deeper things about how U.S. workers participate in the world economy and what rights they have at home.”

Business groups and congressional Republicans have been gearing up for a fight over the rule. Earlier this month a House Education and the Workforce subcommittee held a hearing largely devoted to excoriating the overtime rule, sight unseen. Republican Rep. Tim Walberg, the subcommittee chairman, pledged to oppose any overtime proposal that “goes too far” or that would “inflict harm on the nation’s workplaces.”

The overtime threshold has been updated only once since 1975 and now covers a mere 8 percent of salaried workers, according to a recent analysis by the left-leaning Economic Policy Institute. Raising the threshold to $50,440 would bring it roughly in line with the 1975 threshold, after inflation. Back then, that covered 62 percent of salaried workers. But because of subsequent changes in the economy’s structure, the Obama administration’s proposed rule would cover a smaller percentage — about 40 percent.

The current overtime rules contain a white collar exemption, which excludes “executive, administrative and professional” employees from receiving overtime pay. Advocates for changing the rule say the white collar exemption allows employers to avoid paying lower-wage workers overtime. The proposed rule contains no specific changes to this “duties test,” but instead solicits questions from the public about how best to alter it.

As in the past, the new threshold will not affect teachers, lawyers, doctors and judges, who are all automatically exempt from overtime.

Congressional Republicans will almost certainly attempt to block the overtime rule, as they have tried to do with most of the significant labor-related regulations issued under the Obama administration over the past six months.