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New Overtime Rule May Benefit Millions of Millennials in the U.S.

Salaried workers earning between $23,660 and $47,476 can thank the Obama administration

Burning the midnight oil is about to pay off for millions of U.S. millennials.

The White House on Tuesday announced a new rule that will boost the number of Americans who qualify for time-and-a-half pay whenever they work more than 40 hours in a given week. Among the biggest beneficiaries may be overworked young employees, toiling at startups and ad agencies or serving as restaurant managers, who so far haven't been getting the extra compensation for working around the clock. 

The new rule, which takes effect on December 1, doubles the salary threshold for overtime eligibility to $47,476 a year from the current $23,660. That means that employees earning an annual salary at the new threshold or lower will automatically be eligible for overtime wages, just like hourly workers who already qualify for this extra rate.

Workers across all age groups stand to benefit, but young workers can especially expect a boost, according to Ross Eisenbrey, vice president of the left-leaning Economic Policy Institute. 

"Millennials are disproportionately affected by the overtime rule because they tend to be in the lower end of the wage spectrum," said Eisenbrey, who testified at a congressional hearing last week on the potential effects of the rule. "Though they only represent 28.2 percent of the salaried workforce, they make up 36.3 percent of the newly covered."


According to Eisenbrey's calculations, the share of salaried 25-to-34-year-olds directly benefiting from overtime protections will jump from 9.1 percent now to 38.4 percent under the new threshold. For 16-to-24-year-olds, it will increase from 31 percent to 64.1 percent. That translates to more than 4.5 million newly benefiting workers between the ages of 16 and 34 (and an additional 8 million workers who are 35 or older). Hourly workers, who already get overtime protections, represent 58.5 percent of the American labor force.

The rule marks the federal government's first adjustment to overtime standards in more than a decade.  The threshold was last updated in 2004 after almost 30 years without an increase, and the Obama administration says inflation has been cutting into the real value of that threshold. 

Still, some say such a large increase in the salary threshold could have unintended consequences. Researchers at George Mason University released a study last month that argued that employers will respond by cutting base salaries to account for the addition of overtime pay. Companies may also replace these workers with a smaller number of higher-skilled employees who earn salaries above the new threshold, the researchers said.

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