Overtime Pay: New Rules to Make More Workers Eligible
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What overtime change is this episode introducing and why does it matter?
Here's your money briefing. I'm J.R. Whelan at The Wall Street Journal in New York. We've got details in a moment on how lots more American workers are about to be eligible for overtime pay. First, some money in market news you should know. Some troubling news from the American Bankruptcy Institute. The group says there was a 5% increase in total bankruptcy filings among consumers and businesses in July of this year from the previous month. That comes out to 64,283 filings in July. That rise, however, follows a 10-year low in bankruptcy filings. Still, though, the rise in filings is an indication of people taking out more loans without proper financial stability or they're facing an unexpected life event like illness or job loss.
And we've told you how automated advisor firms like Betterment and Wealthfront, along with savings arms of big banks like Marcus over at Goldman Sachs, have taken aggressive steps in offering relatively high interest yields on cash to attract customers. Well, now Fidelity, one of the biggest brokerage firms, is joining the race. Fidelity manages about $8 trillion in assets and says it is going to begin automatically sweeping cash in new brokerage and retirement accounts into a money market fund yielding 1.91% per year. That's quite a bit higher than the 0.2% national average yield on money funds and 0.09% on savings account balances. Brokerages have given up revenue in the form of trading fees and financial advice, so this is a crucial way to bring in more cash.
What recent market and consumer trends set the stage for overtime rule changes?
Now, Fidelity isn't the first brokerage firm to do this. In recent years, Charles Schwab began sweeping uninvested client cash into low-yielding brokerage products. In fact, Schwab's bank made more than half the company's overall revenue of $10.1 billion last year. That was up from 29% of overall revenue a decade earlier.
New rules are in the works that are going to make hundreds of thousands of more people eligible for overtime. And Wall Street Journal reporter Rachel Feinzig is on the line with us with some details. So, Rachel, these proposed rules go back to the Obama administration. And even though there have been some legal hurdles, it looks like these rules are going to become reality.
Well, kind of. So it's not the federal Obama standard that's going to be going into effect. That proposal did kind of die in the court system starting in 2016. These are new states that are kind of stepping up to fill that gap. Some of them are proposing basically what Obama had proposed. Some are going even further to usher even more people into overtime eligibility.
Now, the Trump administration overtime proposal would set the level at $35,308. Anybody making up to that level would be eligible for OT. Is that stuck in the courts as well?
No, that is proceeding, and we should have a ruling on that before too long. But some of these new state rules will make that level kind of moot in some states because they're going to go so far beyond that.
And New York and California have two of the more aggressive overtime pay rules that are coming into effect.
That's right. We're kind of in various stages of putting those rules into effect. So in California already, those at large employers making less than forty nine thousand nine hundred and twenty dollars and those at small employers making less than forty five thousand seven hundred and sixty dollars. are already eligible for overtime. And by 2023, that level will push up to $62,400. In New York, it varies depending on where you are in the state as well as what type of employer you're at. But they'll be going up to around $58,500. They're phasing that in the next few years. And some folks are already at that level.
And these rules are coming into effect when we are in a very, almost a historic, tight labor market.
You know, talking to employers, you know, some of them told me, like, we're already having to deal with this. We're already having to pay more to get people. So these rules aren't the huge shock that they may have been, you know, a decade ago.
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