Minimum wage and overtime pay saved the economy (and the world)

Mt. RushmoreBefore minimum wage and overtime were instituted, the average American worker worked brutal hours. Workers were easily exploited by their wealthier employers, which forced them to work around the clock just to be able to survive, living paycheck to paycheck and not making much more than what it took to feed their families.

In 1938, President Franklin D. Roosevelt signed a number of bills, one of which was the Fair Labor Standards Act of 1938 (FLSA). The FLSA applied to industries that together held about one-fifth of the labor force, and, among other things, it set a minimum wage at 25 cents for those industries.

Importantly, it also introduced overtime regulations that guaranteed all nonexempt workers be paid time and a half for hours worked over 40 hours a week. These rules were intended to address the exploitation of workers and the lack of jobs.

Overtime rules were also supposed to discourage employers from overworking employees and encourage them to hire additional workers to make up for their existing employees working fewer hours. Under the FLSA, a company that had previously hired one worker to work 70 hours a week for a pittance would need to hire two workers at 35 hours a week and pay them a little bit more to do the same or more business.

The law was considered revolutionary at the time, and, much as they do now, businesses and corporations inaccurately forecasted and complained that the law would harm the economy. In his fireside chat to the nation, President Roosevelt said “Do not let any calamity-howling executive with an income of $1,000 a day… tell you… that a wage of $11 a week is going to have a disastrous effect on all American industry.” Minimum wage and overtime regulations changed the country, and the world, for the better.

To this day, minimum wage and overtime laws are given short shrift for how they improved the world. Republican leadership often complains that the mandate on employers reduces workers’ opportunities for promotions or better jobs. However, overtime pay was the norm about 50 years ago, and more than 60% of salaried employees qualified for it. Office and service sector workers who didn’t have the protection of union membership relied on these laws.

Since then, fewer workers qualify for overtime or minimum wage, and workers work longer hours for less money than their parents and sometimes even their grandparents did. Those who earn more than $23,600 don’t automatically qualify for overtime under the FLSA, which means that every hour you work beyond 40 hours in a week, you are working for free. Salaried employees across the country work an average of 47 hours per week, and a significant percentage work more than 60 hours. Since overtime pay is now unusual, most Americans don’t realize that many salaried workers used to be eligible for it.

Over the last 30 years, corporate profits have doubled, while wages have fallen. The loss of labor protection is a significant factor in the growing inequality and the decline of the middle class. Employees not paid appropriate overtime under FLSA or the Texas Payday Law can file an unpaid overtime claim to seek their back wages. Overtime law remains essential to maintaining workplaces that are equal and safe.

It can be important to obtain representation from an experienced wage law attorney when you have a dispute with your employer. Contact us at (214) 528-6500 or via our online intake form.

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