The Working Families Flexibility Act of 2013, a Republican-backed initiative that passed the House yesterday, is a worthy piece of legislation and an excellent example of the philosophical divide between the two parties. Under the bill, employers could give hourly workers the option — keep the word “option” in mind — of accepting compensatory paid time off, rather than the usual time-and-a-half wage, for hours worked beyond the standard 40-hour work week. Time-and-a-half pay would remain an option — that word again — for those who preferred it. Republicans support giving workers the option, and Democrats bitterly oppose it.
The compensatory time off would accrue on the same model as overtime wages: an hour and a half for each overtime hour. If an employee were to be fired before using his comp time, his employer would have to pay him for any hours accrued. The law explicitly forbids making the acceptance of comp time a condition of employment and other such coercive measures.
The 40-hour work week and the associated overtime rule originated at a time when labor involved a good deal more labor, in the traditional sense of that word: physical exertion, often exhausting and demanding physical exertion. In the modern information-and-services economy, relatively few Americans spend much of their day breaking a sweat. (It should never be forgotten, however, that the U.S. economy would come to an immediate halt without those workers who do: construction workers, freight handlers, oil-and-gas roughnecks, foundrymen, loggers — the U.S. economy runs on more than software.) Many hourly workers, especially those in clerical, services, and other office-bound positions, would prefer some flexibility in their schedules. So would employers. Allowing employers to offer a choice, and allowing workers to accept or decline it, is an excellent way to help coordinate the needs and interests of both parties.
It is easy to imagine scenarios in which such an arrangement would be useful. Most business enterprises do not operate on neat eight-hour-a-day or 40-hour-a-week schedules — business is lumpy more often than it is smooth. From quarterly deadlines to end-of-month inventory chores, the need for man-hours varies in a great many enterprises. The current rules place a mandatory 50 percent marginal price increase on the 41st hour of work. Employers have many ways of handling that situation: They can pay the overtime, to be sure, but they also can job out the associated tasks to temporary workers, part-time help, or third-party providers. Here, the regulatory fallacy is on full display: Mandatory overtime rules do not ensure that overtime is paid; they merely create economic incentives for other labor arrangements.
In spite of the Obama administration’s endless, fruitless promises that a job-market recovery is just around the corner — we are now entering into our fifth annual “recovery summer” — the employment outlook is grim for many Americans. It is the most grim for those likely to be working in hourly positions, especially unspecialized positions, i.e., those in jobs most vulnerable to outsourcing. Flexibility is a way to lower the cost of labor without lowering hourly wages or reducing paid work hours. So long as demand curves slope downward — which is to say, so long as reality is reality — imposing artificially higher labor costs will exacerbate our unemployment problem. That is an economically destructive thing to do.
Compensatory time off, especially at a time-and-a-half rate, is very valuable to some workers. Those with family responsibilities, for example, might welcome the opportunity to work an extra hour and six minutes a day during any given month in exchange for four paid days off later. And the unfortunate fact is that the realities of the Obama economy mean that many hourly workers are holding down more than one job, and paid time off is an earning opportunity.
The Democrats complain that this represents “the end of the 40-hour week.” Perhaps it does. The Obama economy has meant the end of the 40-hour week, the 50-hour week, and the 20-hour week for millions of Americans, fewer of whom are working today than at any time since the feckless Jimmy Carter was in the White House. Flexibility makes Americans’ labor inherently more valuable, which gives employers incentives to hire new workers and retain existing ones. The Democrats behave as though we are still in the age of the Molly Maguires and the company store, and they demand that if any American is going to work, he does so under the terms preferred by the Democratic party. Oddly enough, the Democrats’ most important electoral base — unionized public-sector employees — in many cases already enjoy precisely the flexibility that this act would give to private-sector workers. Strange that they trust themselves with that choice but do not trust their fellow Americans with it.
There is no quick or easy fix to what ails the American job market. But adding to the cost and bureaucratic burden of hiring workers, as Obamacare does, or maintaining outdated regulatory rigidities within the labor market, are moves in the wrong direction. Flexibility and choice are benefits everywhere else in the economy, and they are in the labor market as well.