Obama's Overtime Rule -- Bad for Jobs & Employment | [site:name]

Senator Bernie Sanders, the irascible Vermont socialist, has been making a strange complaint as he grumpily stumps for the anyone-but-Hillary vote: Americans are working too much — more than the Japanese, he laments, more than the Brits, and much more — he says this with a smirk — than the French. President Obama apparently agrees, and his Department of Labor is planning to propose a new rule that will encourage businesses of many kinds to cut their employees’ hours.

Under current law, salaried workers earning $23,660 a year or less are automatically entitled to time-and-a-half overtime pay when they exceed 40 hours of work in any given week. The Obama administration wants to raise that threshold to as high as $50,400, meaning that office managers salaried at around $1,000 a week would be treated like minimum-wage fast-food workers in the event — the very likely event — that they clock 41 hours in a week. Under the current rule, about 11 percent of salaried workers (as opposed to hourly workers) are covered by the mandatory time-and-a-half rule; under the higher threshold, the majority of workers, and potentially a large majority, would be covered.

That does not mean that a great number of assistant managers at McDonald’s are going to see bigger paychecks. As the National Retail Federation calculates, raising the threshold to somewhere around $1,000 a week would make millions of workers eligible for mandatory overtime, which would cost employers many millions of dollars — assuming employers do nothing in response to the new rule, an assumption that the NRF rightly calls “unrealistic.” The more likely outcome is that employers will adopt policies — rigid ones — limiting employees’ hours to keep them under the thresholds of federal mandates.

Regulators always proceed as though businesses are not going to change in response to regulation, and they are always wrong.

We have, of course, seen this before, as in the case of the Staples manager whose memo threatening to fire part-time workers exceeding 25 hours (near the Obamacare threshold) became infamous a while back. The regulators always proceed as though businesses are not going to change in response to regulation, and they are always wrong. That does not mean that employers will get away without new expenses, though: Like all regulation, this would impose compliance costs on businesses even when workers aren’t seeing an extra dime.

There are many ways in which employers compensate salaried employees who work more than 40 hours a week. Some of them pay overtime, some of them offer compensatory time off, and some of them — this part is hard to quantify — offer employment in which exceeding 40 hours is not a great hardship.

Consider the case of apartment managers, who earn an average of $919 a week according to the Bureau of Labor Statistics. The work they do varies enormously from property to property, but a great deal of it often consists of simply being present, doing things such as receiving packages or connecting tenants with maintenance workers when the need arises. The typical apartment manager, hardworking though he may be, probably spends a bit more time on Facebook during the work week than does the typical coal miner, the sort of worker for whom our antiquated overtime rules were designed. There are plenty of salaried people working in law offices, newspapers, marketing firms, nonprofits, etc., who earn less than $1,000 a week, who sometimes exceed 40 hours, and who are not terribly burdened by that situation.

The rules that made sense for an assembly-line worker in 1938 do not necessarily make sense for a legal secretary or a copy editor in 2015. Taylorism has been revealed as superstition, and 21st century work isn’t necessarily a steady flow — often, it is lumpy, and the relevant temporal unit is time between deadlines rather than length of shifts. That is, in fact, one of the reasons that so much modern work, particularly managerial work, is salaried rather than hourly in the first place.

Normal people — a set that excludes federal bureaucrats — understand that, and in the typical workplace a modus vivendi emerges. That modus vivendi can be shifted in favor of higher wages for workers, but the only real way do accomplish that is through robust economic growth, which increases real organic demand for labor, rather than through the imposition of arbitrary rules, operating by remote control from Washington, which mainly encourages rule-evading behavior.

Our progressive friends often look overseas for guidance, especially on questions of labor-market intervention. This is not often a good idea, inasmuch as Mississippi is not Finland, but it is worth considering a few examples. In Switzerland, there is no national minimum wage or mandatory overtime threshold; instead, practices vary by region and by industry. Many American progressives admire Australia’s relatively high minimum wage but would balk at its “junior worker” provisions, which establish lower minimums for those 21 years of age and younger and for inexperienced “apprentice” workers.

#related#In the United States, the income figures for workers 25 and younger look very different than those for workers 25 and older, and overtime practices vary widely from industry to industry and from job to job — which is as it should be. The average adjunct professor in the United States makes less than $40,000 a year, but it is hard to imagine a good reason for treating his work hours the same way we treat those of a steelworker or those of an autoworker putting together vans in Charleston. The secretary of labor can play Bismarck-on-the-Potomac all he likes, but one size truly does not fit all.

The higher overtime threshold probably will not add much to American workers’ paychecks but will instead simply give employers more reason to limit work hours, to increase their reliance on part-time workers, and to outsource such work as is outsourceable. At the margin, it will price some Americans out of $50,000-a-year professional positions that they might very much like to have.

If the goal is increasing Americans’ incomes, this is the wrong policy; if the goal is satisfying Senator Sanders’s desire that American workers have more idle time, then the Obama administration could do worse, and probably will.