The Corner

New Overtime Regulations an Attempt to Turn Back the Clock

The Department of Labor has announced that it is going to update overtime regulations that were last revised in the 1970s. The purported effect will to extend mandatory overtime payments to people who earn $50,440 annually or less, over double the current threshold of $23,660. The administration claims that this will mean that 40% of salaried workers will be eligible for overtime, putting another $1.2 billion in workers’ pockets.

Like the minimum wage, this is a great example of Bastiat’s ”seen and unseen” in action. The unseen effect, as Warren Meyer’s Coyoteblog ably points out, will be to abolish an entire level of junior management in America. Junior managers will become timeclock punchers, the hours they want to work being scaled back, with concomitant reduced opportunity to demonstrate their abilities to business owners. Technology and creative companies will be particularly badly hit as they will need to convert their innovative benefit packages (there are even technology companies that offer unlimited vacation) to overtime to deal with engineers who put in 100-hour work weeks.

There are good reasons why the overtime threshold has not been raised since the 1970s. Employment practices have moved on. We live in a globalized world where the barrier between work and home has been broken down, and employers have offered far more than just pay to compensate for that. The Department of Labor wants to turn back the clock on all of this by using a 1938 law to reimpose 1970s employment conditions.

Of course the supporters of the move will point out that not all employees are happy with those new arrangements, but as Warren also notes the actual figures produced by the Department of Labor belie the idea of significant widespread benefit. The average addition in take home pay for affected workers will be $261, while base wage rates and hours worked will fall slightly. 

Of course, the industries most likely affected by these changes will be customer-oriented retail businesses like fast food chains. When you combine this move with the National Labor Relations Board’s attack on franchise industries a pattern begins to emerge. The administration is trying to soften up these industries for unionization, which will be made even easier by the NLRB’s ambush election rule.

So when you ask who will benefit most from these rule changes, the answer isn’t the average worker. It certainly isn’t the aspiring junior manager. It’s the union bosses.