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New overtime rule will give economy a boost, but ‘ossified’ labor law still needs fixing

The Obama Administration issued new rules this week that will allow millions more Americans to qualify for overtime pay.

The Labor Department regulation, which will take effect in December, will double the annual threshold that helps determine who qualifies for overtime when they work more than 40 hours in a week. Under the new rules, anyone who makes less than US$47,476 will be eligible for overtime pay (the old threshold was $23,660).

The Labor Department said 4.2 million workers would now qualify for overtime. The rule change is expected to boost wages by $12 billion over the next decade.

Back in July 2015, after the Labor Department first proposed lifting the threshold (to $50,440, under the proposal at the time), we asked two of our experts to weigh in on whether it was a good idea.

Lonnie Golden, professor of economics and labor-employment relations at Pennsylvania State University, called the overtime update better late than never and a net win for most workers. He noted that the last time it was changed was in 2004 (that was first time since 1975).

President Obama’s overtime update is long overdue and will give a boost to millions of workers, many of whom don’t earn that much more than the official poverty line, thereby spreading the benefits of the economic recovery more evenly. It will also, in turn, likely give the recovery itself a bit more juice.

Management professor Thomas Kochan argued that this week’s change should be just the first in a series of executive actions aimed at updating our outmoded labor policies. They need to catch up with changes in the economy, the workforce and the way people work today, wrote Kochan, who is co-director of the MIT Sloan Institute for Work and Employment Research.

Our 1935 labor law is “ossified” and fails to provide workers who want collective bargaining to get through the legal hurdles that block access to it. Congress has not passed a significant new law nor updated any of the nation’s New Deal vintage labor or employment laws in decades. Given this sustained congressional gridlock, the president and secretary of labor can only search for tools that might make a difference.

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