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New Overtime Policy: How It Affects Black Workers

More than 4 million U.S. workers may become eligible for overtime wages thanks to a new overtime pay policy set to be issued by the Obama Administration on Wednesday.

The new rule will drive up the annual salary threshold at which companies can determine overtime pay from $23,660 to almost $47,500. The measure would raise pay by as much as $1.2 billion a year over the next decade, according to the White House. Workers who get hourly pay would continue to be eligible for overtime, regardless of their annual income.

The policy change could significantly impact many African American workers because the median household income for Blacks in the United States is about $35,600, according to U.S. Census Bureau figures. That means many Blacks who were salaried workers, but did not qualify, may soon be eligible.

However that may all depend on where they are working and the individual decision of companies, said Margaret Simms, Institute Fellow and Director of the Low Income Working Families Project at the Washington D.C.-based Urban Institute. But an increase in overall incomes is possible.

“In looking at the Census Bureau figures, about another quarter of African American workers would be entitled to overtime who were not previously,” Simms explained. “So that would be a substantial number.”

But it is unclear really how large an impact the change would have on the Black middle class and increases would go on an employer by employer basis.

“It would depend on how decisions are made for individual companies and how that adds up,” she said. “For some individual businesses where demand is high, overtime may continue. For others where completion of a project is more flexible, some employers might want to take longer so they would not have to pay overtime.”

The overtime threshold was last updated in 2004 and now covers just 7 percent of full-time, salaried workers, administration officials said. To give a little history, that’s down from 62 percent in 1975.

The higher threshold, which will take effect Dec. 1, will lift that ratio back to 35 percent, Labor Secretary Tom Perez said. Perez has spearheaded the administration’s effort and worked on formulating the rule for the past two years.

In recent years, minimum wage has garnered much of the attention when it comes to pay increases. The “Fight for $15” movement has gained traction in several cities in an effort to get higher pay for low wage workers.

But the new policy could have a much broader impact.

“This in essence is a minimum wage increase for the middle class,” Judy Conti, federal advocacy coordinator for the National Employment Law Project, an advocacy group, told the Associated Press.

However, employers will still be left to work out how it will affect their individual businesses.

Mara Fortin, president and CEO of seven Nothing Bundt Cakes bakeries in San Diego, said she might give raises to her “superstar” managers to lift their pay above the overtime threshold. But she would have to cut back on end-of-year bonuses she frequently gives to offset the cost.

Fortin has 14 salaried managers and assistant managers among her 110-member staff. The new rule will create problems for managers, some of them newer, who take longer to get their work done, she said. She might have to cut their base pay so they make the same amount as they do now, even including overtime.

“We can’t pay you time and a half because you’re slow,” she said. “This is extremely frustrating for me.”


With reporting from Associated Press
This story has been clarified to accurately reflect a statement given to JETMag.com