Overtime scheme more dangerous to economy than minimum wage hike

by Walter Olson on March 14, 2014

So says Coyote, and I agree with him (earlier here).

…companies will quickly restructure their work processes to make sure no one works overtime. And since their new hires are working just a straight 40 hours (with mandatory unpaid lunch break time in CA), they will likely pay less. If I am paying $40,000 a year for someone who will work extra hours for me, I am not going to pay that amount to someone just punching a time clock. And the whole psychological relationship is changed – a salaried person is someone on the management team. A person punching a timeclock may not be treated the same way. …

…for those who think schools assign too much homework, this could well be the end of homework. The most dangerous possible thing with hourly workers is to give them the ability to assign themselves unlimited overtime. Teachers could do this at home with grading papers. If I were a school, I would ban teachers from doing any grading or schoolwork prep at home — after all, it’s hourly and probably overtime and they could work unlimited hours at home and how would you get it under control? The only way to manage it would be to ban it entirely.

He marches through some of the implications, all bad, for employee travel (why allow it except for the direst company needs if every hour on the road is going to be paid at time and a half?), ObamaCare incentives, and the erosion of a minimum pay guarantee for those whose salary now provides one. (On the homework issue, incidentally, teachers are exempt under current FLSA rules; grading papers at home would only be dangerous assuming a change in those rules.)

{ 1 trackback }

Obama's new overtime decree - Overlawyered
03.14.14 at 3:45 pm

{ 12 comments }

1 Allan 03.14.14 at 3:48 pm

Poppycock. The real world does not work that way.

The result will be:

1. A bunch of people who were not getting overtime will either be told to work less than 40 hours/week or will be paid just over the threshhold (which I guess will be around $36,000). In effect, no change in hourly wage for some and a raise for some.
2. Business will survive the costs.
3. Business will do better because it will increase the middle class and enable people to buy things from business.

We need to increase demand. That is what runs the economy. The president’s initiative does this.

Rules like this exist in many mid and northern European countries and they are doing just fine.

2 Walter Olson 03.14.14 at 4:29 pm

Since you don’t think minimum wage hikes harm the economy in the first place, Allan, I’m surprised you’d object to a post saying forced conversion of salaried employees to time-clock status would be more damaging. Both measures are pure gravy, anyway, right? We can pass as many of them as we like since business pays the costs, with none borne by workers or consumers.

I notice that those European countries that discourage voluntary long workweeks do not seem to compete very well with us in fields where rush-status projects are important, such as software development. But perhaps we can let those sectors of the economy slip and still be “doing just fine,” at least as regards our own self-esteem.

3 Allan 03.14.14 at 6:29 pm

Finland does not do well in software development?

I don’t think either higher minimum wage or more expansive overtime will hurt the economy. I do believe that a higher minimum wage will help more.

I do not believe the costs to business for either will be as bad as you think. It will, however, be bad for those at the top. I believe labor and capital should share profits more equitably. I further believe that the tax code is slanted too far toward capital.

As for the point. If a person makes a $25,000 salary working 80 hours a week, the only way a 40 hour per week job would be to pay the worker about $6.00 an hour. If that worker wanted to work more, but his employer did not want to pay overtime, the worker could get another job. In that case, he would be working the same job and likely make much more money (especially if we raised the minimum wage.

We have a long way to go to get to the labor laws Europe has. We also have a way to go to have the labor laws of, say, China. Would you prefer the Chinese approach?

4 gitarcarver 03.14.14 at 6:43 pm

For the record, in my career I have worked for two companies where every employee was on the clock except for one – the owner.

These were not small firms having employees of 5,000 – 7,000 people at multiple locations. There was not a divide between salaried and non salaried people. The managers felt they worked and were compensated for that work at a constant rate. The worker bees felt they were on the same pay structure as management.

Did it add to costs? Hard to say. The company was very competitive within the industry and maintained pricing inline with other firms. (Less than some firms on different markets.)

What I do remember is that the managers were aware of the time it took to complete tasks, looked to make those tasks efficient and scheduled accordingly. That awareness may have actually saved the company time and money.

5 kimsch 03.15.14 at 11:29 pm

I heard someone say that these new overtime rules could actually create jobs. The reasoning was this: In order to avoid paying overtime to some employees, the employer would just hire another employee.

Yeah, because for those 5 hours of overtime during a week, the employer would rather pay the full hourly wage plus all the other attendant costs of an employee instead of the extra half wages (two and a half hours’ wages) to the employee working overtime.

6 Bumper 03.16.14 at 2:15 pm

From a politicians viewpoint one hundred percent of government intervention in private wages has nothing to do with caring about the workers and everything to do about getting re-elected. From a liberals viewpoint such government intervention is an opportunity to show those nasty, uncaring conservatives who is boss all the while helping all those poor down trodden workers to live a better life, all the while championing the 7 to 17 million illegals who work off the clock for less that minimum wages. And unions love the minimum wage, because many of union contracts are tied to it, so if the minimum wage gets raised so does their pay scale.

7 Allan 03.17.14 at 10:53 am

The liberals pander. Perhaps the conservatives pander as well. I prefer panderers who work on policies to help even the field for labor. Perhaps Bumper prefers those who pander to capital.

8 DEM 03.17.14 at 2:43 pm

“2. Business will survive the costs.
3. Business will do better because it will increase the middle class and enable people to buy things from business.”

_________________________

And if these speculations turn out to be wrong, then what? Sorry, our bad? That would be a decent consolation, I suppose, but we won’t even get that. Instead, it will be obfuscation combined with proposals for even more government action to “solve” the problems the government created in the first place. See, Obamacare.

9 SmokeVanThorn 03.17.14 at 5:02 pm

“I prefer panderers who work on policies to help even the field for labor. Perhaps Bumper prefers those who pander to capital.”

You’re wearing a Che t-shirt, aren’t you?

10 Bumper 03.17.14 at 6:03 pm

Allan,

Without capital there are no businesses, without businesses there are no jobs. Except for the government, who gets its capital by stealing from everyone who has a job, so liberals can stay in positions of electoral power by giving away that stolen money to people who never wanted to work in the first place.

N0 doubt you are aware that the federal government is now limiting the percentage of income that certain businesses can keep for themselves. Commonly called profit, which normally goes for such things as payroll, reinvestment in infrastructure, etc. See, Obamacare.

Note: stolen is a pejorative term encompassing all taxes, fees, permits, fines, etc.

11 Smallgovernmentguy 03.17.14 at 6:17 pm

The only way that increasing labor costs will increase the middle class and allow people to buy more things is that some sort of multiplier effect comes into play. Otherwise, the rise in prices and reduction in hours will be a wash, at best.

Logically, this policy will do more harm than good.

12 Allan 03.18.14 at 5:53 pm

Bumper,

Without labor, capital means nothing. Capitalism cannot survive without a labor force.

I do not agree that a tax/permit, fee, etc. is ill-gotten gain. The US is a successful country because it has the infrastructure that people want. We have roads. We have airports. We have clean water (or try to). We have clean air (or try to). We have safe houses. We have police. We have armed forces. Without all of these, businesses would not survive. Either businesses get them from legitimate government, or they would have to provide the infrastructure themselves. And the latter has never worked anywhere that I can think of.

Smallgovernment,

Our policies now allow distribution of wealth to the most wealthy. Were it distributed more equitably, there would be more for the middle class to spend. There has been a multiplier effect. labor has become more efficient. the result is not that labor gets the same amount of the pie. Instead, the savings (profits) have exclusively gone to capital.

i guess my position is that the labor market is broken, to the extreme benefit of capital.

Comments on this entry are closed.