"...Will the law of unintended consequences please report to the American economy."
President Obama this week will seek to force American businesses to pay more overtime to millions of workers, the latest move by his administration to confront corporations that have had soaring profits even as wages have stagnated.
On Thursday, the president will direct the Labor Department to revamp its regulations to require overtime pay for several million additional fast-food managers, loan officers, computer technicians and others whom many businesses currently classify as “executive or professional” employees to avoid paying them overtime, according to White House officials briefed on the announcement.
The article makes it sound like the change is imminent, but at the moment this is just more political theater in Obama's phony war on income inequality. No concrete proposals actually exist as the Presidential Memorandum that Obama signed yesterday is just the beginning of the regulatory process. There will be studies, a proposed change, time for comment, and almost certainly input from Congress amid a ton of lobbying. What actually will come out of that process and when is anybody's guess.
A reasonable case can be made for adjusting the minimum salary threshold below which an employee cannot be made exempt from receiving overtime. It has been 10 years since that was adjusted and inflation has added up to about 24% during that time. A more radical increase, such as the more than doubling mentioned at the link, would create chaos and probably hurt vastly more employees than it would help. At the same time it would put additional regulatory costs on employers, making less money available for either salaries or profits.
At work here is the same childish economic narrative that permeates Obama's misguided attempt to raise the minimum wage. In that narrative workers are mostly helpless against the ravages of the greedy and stupid corporations and businessmen. It takes the enlightened hand of government to show owners and managers that paying employees a fair wage makes them happier and more productive and companies will have less turnover.
Because nobody but Obama and his team of economic geniuses would ever think of that.
There are, of course, crappy companies out there that abuse exempt employees and they undoubtedly suffer from unhappy workers and high turnover. But generally speaking, companies understand how to compensate their employees far better than ham-fisted politicians. On top of that, men and women classified as executives and professionals are usually more valued and have more alternatives than the average hourly worker, and employers have more incentive to keep them. If they beat the heck out of those employees with a bunch of uncompensated overtime they will lose them. And they know it.
I've been salaried and exempt from overtime the last 29 years at four different companies, because the positions I held were considered professional, executive, or both. The reason for making me exempt from overtime was not to "avoid paying" me overtime, it was because those jobs and responsibilities required flexibility in when and how much I worked. And I was compensated for that, as were the hundreds of my peers that I worked with over the years. There were times, especially when those companies were growing, when hours and compensation got out of whack, but that's part of the flexibility and eventually things evened out. I can say with certainty though, that no company I worked for ever expected a free lunch in that area.
So if/when Obama seeks "to force American businesses to pay more overtime," what is going to happen?
Well, what's not going to happen is a sudden windfall of overtime pay to American workers. Businesses are not going to just shrug and move on, even if they can afford to pay more to their employees. Instead, life is going to get more complicated for everybody.
For affected employees a time card will probably accompany a new and lower hourly base rate. Congratulations! Since most employers are not actually out to screw their employees, an expected amount of overtime will probably go with that to keep compensation at about the same level. Now all they have to worry about is some new boss coming in and the all too familiar "No Overtime!" edict coming down from on high. That's the real world.
Instead of helping workers and forcing companies to pay higher salaries, radical changes to overtime rules are more likely to just make life more complicated for everyone, and could actually result in some of the affected employees making less money than they did before.
Hopefully Obama will tread lightly here, but I doubt it. The Obungler is an obviously intelligent man who is so blinded by ideology and his belief in his own bullshit that he'll drive the more radical options home now that he's made them into a 2014 campaign issue. Or at least he's going to try. There's still a chance that common sense will prevail, but I'm not hopeful.