The new Labor Department overtime rule is a win for workers—and good policy, too

On July 1, the first step of the U.S. Department of Labor’s new overtime rule went into effect, meaning about 1 million salaried, white-collar workers currently exempt from overtime began receiving greater protections—a higher salary, new eligibility for overtime pay, or more time with their families, depending on how their employers respond. After the rule is implemented in full on January 1, 2025, more than 4 million workers will see these sorts of benefits.

The Department of Labor is responsible for establishing the minimum salary that a white-collar worker must earn to be exempt from overtime pay requirements for working more than 40 hours per week. Yet that value has eroded over time. The new overtime rule will restore the historical function of the salary threshold, raising it from $35,568 per year to $43,888 per year on July 1, and again to $58,656 per year on January 1, 2025. The rule also provides for regular adjustments to the salary threshold every 3 years to account for the latest data and avoid large swings in the future.

Undoubtedly, this new rule is a much-needed step forward to empower workers in the United States. But executive action is only truly effective for equitable economic change if it has an impact across all communities—including those that are too often left behind. What’s especially notable about the new rule is that the Labor Department had access to detailed data during the policymaking process to ensure that the new rule would make a difference for Black workers, Hispanic workers, and women workers—a big deal in advancing equity.

While this may seem like standard practice, it actually represents a significant change that we now have a demographic breakdown of these impacts. Scholars, researchers, and advocates have long pressed for governments to better measure the effects of executive action on underserved communities.

Late last year, the White House Office of Management and Budget updated the government’s internal guidance for preparing cost-benefit analysis of regulations to do just that. This seemingly wonky step toward transparency will help us better understand the stakes when it comes to executive action. In line with this cost-benefit guidance, the Department of Labor also included a distributional analysis in the new rule’s Regulatory Impact Analysis of how it will affect workers, broken down by sex, race, ethnicity, age, and even level of education. 

To be sure, this new overtime rule isn’t the first to describe demographic impacts. The Occupational Safety and Health Administration’s emergency temporary standards for COVID-19 in healthcare compiled the available literature on increased workplace risks for workers of color. The Wage and Hour Division’s new independent contractor rule outlined the disproportionate representation of workers of color in occupations and industries where misclassification is most prevalent.

Other agencies outside of the Labor Department have conducted similar analyses, too. The Environmental Protection Agency, for instance, highlighted in its heavy-duty engine and vehicle standards that people of color and people with lower incomes would benefit more than others, in part because they are more likely to live in areas of lower air quality to start. 

But this executive action on overtime takes evidence-based policymaking to the next level. The new rule will be particularly impactful because it builds upon past regulatory efforts to focus the greatest impact on those who have been historically marginalized, not only by harnessing demographic data to illustrate the effects, but also because of the striking scope of the rule’s impact. This executive action will give new protections to 19.6 percent of white-collar, salaried women left out of the law today. Likewise, 21.7 percent of comparable Black workers and 19.5 percent of Hispanic workers will have new protections.

Put another way, the new overtime rule will extend protections to nearly 1 out of every 5 Black, Hispanic, and women white-collar workers who are currently exempt from overtime.

As with many executive actions, the overtime rule faces court challenges intended to stop it in its tracks, and one court has already blocked its implementation for a small number of Texas public employees. Even so, the overtime rule is blazing the trail for measuring the impact of regulations in the future. By institutionalizing this new rule’s cost-benefit analysis practice, we can help ensure that all executive actions are not only effective, but also crafted to ensure that economic gains are shared by all of our nation’s workers.

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