In our last blog post on the recently announced changes to the Fair Labor Standards Act (FLSA), we discussed the financial security that a full-time, salaried job with benefits offers to families. Far too many low- and moderate-income Southerners who work full-time, however, do not fully benefit from the increased security of predictable and limited hours. One of the big reasons for this gap is that, until the new changes go into place in December, the intended overtime protections under the FLSA allow some industries to take advantage of outdated regulations, paying poverty-level wages to full-time workers who consistently work above and beyond the 40-hour work week. With the current salary test for exempting an employee from overtime protections ($455 a week in earnings), a single adult with three children is below the poverty line, and well below what it takes to make ends meet.
According to an analysis by the Economic Policy Institute, the groups most likely to benefit from the new overtime rules are predominantly women, workers under age 35, racial and ethnic minorities, and those with lower levels of educational attainment. Below, we examine the trends and current earnings gaps by gender, race, educational attainment, and occupations that are most likely to be affected by the new overtime rules.
FLSA changes in brief
The U.S. Department of Labor issued a final notice of rulemaking that will increase the share and number of workers eligible for overtime protections. Specifically, the ruling increased an outdated salary threshold used to determine eligibility for exemptions from overtime protections: the old threshold of $455 per week (last adjusted in 1975) was updated to a new threshold of $913 per week. The new salary threshold for an overtime-exemption will go into effect on December 1, 2016. In short, a portion of workers that make more than the $455 threshold and less than the $913 threshold will likely get an immediate wage bump. A large percentage of these workers live and work in the South and are likely to benefit from greater financial security and work-life balance that enables the pursuit of additional postsecondary education or training to meet the requirements for the jobs of the future.
Who is likely to benefit from these new rules? And how does educational attainment factor in?
Women: The gap in median, full-time, salaried weekly earnings for men and women is closing, but the need for progress remains. In 1979, women’s median weekly wages were only 62 percent of their male counterparts; in 2014, that figure was 83 percent. While women now account for a greater proportion of workers in professional occupations, continued growth and representation in occupations that offer a living wage is necessary to close the gender wage gap.
Young Adults: Nearly 36 percent of the workforce directly benefiting from the new FLSA rules are in the 16-34 demographic. An even higher share of the group’s salaried workforce is projected to benefit than other age groups: 33 percent of 16-24 year olds and 29 percent of the 25-34 years.
Adults with less than a college education: A postsecondary degree or credential has long been the strongest predictor of securing a full-time, salaried job in today’s modern economy—but when disaggregated by race and gender, the median weekly earnings for full-time salaried workers are either below or barely above the new threshold for blacks, Hispanics, and women. For workers with less than a bachelor’s degree, weekly earnings are well below the new $913 threshold, and for those with less than a high school diploma, right at the 1975 threshold of $455 per week.
As shown in the chart below, adults with some college or no college are disproportionately likely to benefit from the changes to the FLSA. Nearly 62 percent of directly affected workers have some college education or none, and the share of workers by educational attainment is highest among those with at least a high school education (38 percent).
Occupations: According to an analysis done by EPI, workers in a set of 13 occupations are most likely to directly benefit from the new changes to the FLSA. Leading the group are two white-collar categories: management, business, and financial occupations; and professional and related occupations. Also on the list is service-sector occupations—a segment of the Southern economy that is growing more rapidly than most.
A family-supporting wage is a critical element of the Infrastructure of Opportunity
Far too little of the South’s current workforce are earning family-supporting wages—a product of policies, funding, and systems that have continued to produce low educational attainment and employment opportunities in the region. The changes to the FLSA and overtime regulations are expected to largely benefit women, people of color, young adults, and those with lower levels of educational attainment. Changing how work is compensated in the South, however, is not a silver bullet for stalled economic mobility in the region. In order for the South to succeed economically, states and communities must prioritize the building blocks of an Infrastructure of Opportunity for their citizens. As the data above suggest, educational attainment is and always has been the best predictor of a family-supporting wage. For those workers who represent the working-poor, the new FLSA changes offer the potential for an immediate wage boost and the potential for the time and flexibility to pursue a valuable certificate or degree to take the next step in their career.