New overtime reg is another small step the Obama Administration is taking towards greater wealth equity

It was to be expected that conservative politicians and business organizations would complain about the U.S. Labor Department’s new overtime regulation, which mandates that anyone making under $47,476 a year automatically qualifies for time-and-a-half pay for any hours worked over 40 per week.  For example, Speaker of the House Paul Ryan criticized the new rule that enables 4.2 million more Americans to receive overtime pay, saying the regulation “hurts the very people it alleges to help.” Business organizations such as the American Bankers Association, the National Retail Federation, the Society of Human Resource Management and the U.S. Chamber of Commerce have all bemoaned the new regulation, focusing exclusively on the problems it will cause for small business and the employees receiving the overtime wage boost. The mainstream news media, of course, has quoted many small business owners complaining about the new reg.

One main argument against paying people extra money when they work more than the normal week sounds just like what business interests say about raising the minimum wage: that it will lead to employers hiring fewer people. This old saw is complete BS, as I have demonstrated before. Virtually all businesses only hire the minimum number of people needed to do the job, as they always seek to maximize profit. The result of increasing the number of people to whom companies must pay time-and-a-half will certainly be to raise the cost of labor, unless employers try to avoid the additional expense by hiring additional people at the regular rate to work the hours that they will no longer give to existing employees. The choice then is that current employees make more money or the company hires more employees. That sounds like a win-win for labor.

Here is some more nonsense the news media has published about the impact of making employers pay time-and-half to lower-paid employees who work more than 40 hours a week:

  • Employees won’t want to keep track of exact hours: Many, if not an overwhelming majority, of employees already keep precise track of their hours with time cards and time sheets.
  • People work harder for a salary: Whether or not this gratuitous insult of the working stiff is true matters not in discussing the validity of applying this blanket statement to the issue of overtime pay. Any good employer develops quantifiable measurements of job performance. If someone starts to fall below the performance standards of the job, a supervisor will talk to the employee, no matter what the reason. It’s easy and legal to fire an employee who continues to perform below standard when the only reason is because he or she is trying to work the system to get time-and-a-half.
  • It will make it harder to give employees flexibility in hours: A ridiculous claim! As long as employees keep accurate track of hours, who cares if they came in at 5:00 am so they could leave for their daughter’s chess tournament at 3:00 pm or if they worked the hours at home or at the office or took off Thursday and worked Saturday of the same week.
  • Employers will turn full-time employees into part-timers. Employers who want to save money by only hiring part-timers don’t need the incentive of time-and-a-half to do so. As discussed above, while employers may hire more people to work straight time, cutting hours back below 40 (as opposed to exactly 40) won’t reduce the cost of the new regulation.

The rationales for paying people extra money for overtime are simple:

  1. The extra time puts a burden on meeting other, i.e., family, responsibilities and enjoying an outside life.
  2. It’s harder on the mind and body to work long hours, and employees should therefore get additional compensation.

I have asked employees to work very few overtime hours over the 27 years I have owned an advertising and public relations agency, because I believe that work performance degrades after eight hours a day and 40 hours a week and I also believe that people are better employees when they have a full and active personal life than when they dedicate themselves solely to the job. There have been times when the temporary demands of the job have forced people to work extra hours. We have often given comp time to those working overtime, something that the new regulation does not allow for employees making less than $47,476. Thus, my costs will go up a little bit, which means my profit margin will decline slightly. I’m not too worried about it, and I’m happy to pay time-and-a-half instead of straight time (which you pay whether directly or through comp time) for the occasional overtime hour of lower-paid employees. I know I’m still making additional profit from the overtime, since the same office, administrative and healthcare costs are being spread over more hours. Those (immoral) companies that have built extra profitability into the system by making employees regularly work overtime for nothing or straight time may have a greater challenge.

I’m disturbed by the number of legal scams that the Wall Street Journal and other media are reporting that employers have already devised to avoid paying time-and-a-half or any overtime pay. Some companies say they will reduce the base rate of employees who routinely work overtime, meaning that for the employees to maintain their current income they will always have to work the extra hours. Other employers or industry representatives say they will raise the salaries of employees to over the threshold above which they don’t have to pay overtime and reduce bonuses to compensate. Let’s hope the Department of Labor adjusts their regulations accordingly and goes after these scofflaws.

Let’s face it. One of the two major reasons that the wealthy—meaning business owners, executives and highly-paid specialists—have taken virtually all of the additional wealth and income over the past 36 years is that salaries for all but the very top wage-earners have stagnated until quite recently. The other reason, BTW, is that the government has taxed the wealthy less and provided fewer services to the poor and middle class. Like increasing the minimum wage, mandating overtime pay for more employees and setting it at one-and-a-half times base hourly wages goes a little way to restoring wealth equity.

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