Among the topics President Obama discussed with the Huffington Post in his recent interview was an obscure federal rule about overtime in private workplaces.
Under the Depression-era Fair Labor Standards Act, hourly, non-supervisory workers must be paid time-and-a-half for hours worked above 40 hours per week. This rule applies to all workers who make under $23,000 per year, and to higher-paid workers who do not perform professional or managerial duties.
Obama promised last year to raise this threshold, asserting that companies often get around the overtime rules by designating workers as managers even where the label doesn’t seem to apply.
“What we’ve seen is, increasingly, companies skirting basic overtime laws, calling somebody a manager when they’re stocking groceries and getting paid $30,000 a year,” Obama told Sam Stein in an interview posted on Saturday. “Those folks are being cheated.”
According to various media reports, Obama could choose to set the bar for “manager” at $42,000 per year, or even as high as $57,000, which would affect the status of 6 million managerial workers or more.
The problem with this change really has nothing to do with any specific dollar amount. The question is why such rules still exist at all, especially at the federal level. For one thing, not all honest-to-goodness managers can or should be paid $60,000 just so that employers can afford to give them the flexibility to stay a bit longer when problems arise at work. But even in the occasional cases where the label is misapplied, it is not so much a conspiracy of employers to reduce wages as it is an attempt to circumvent a set of dumb, totally inflexible federal rules on work hours that make it illegal in many circumstances for workers even to trade shifts. These rules make it very hard for employers to operate a workplace or accommodate individual employees’ needs without incurring massive increased labor costs.
This goes double for those with supervisory responsibilities that at times require flexible hours. A person with even the smallest management responsibilities often cannot just clock out when his time is up, which is the entire reason for the managerial exception.
The underlying question here, of course, is why the federal government should be involved at all. Why should Washington behave as though employees are too stupid to choose to work 42 hours this week and 38 the next at the regular rate without bringing the wrath of Obama down upon their bosses? If an hourly employee wants to work a few extra hours this week when it’s convenient so that he can take time off next Thursday to see his kid’s school play, what interest does the secretary of labor have in preventing such an arrangement?
This is inconvenient for employers and employees, but even worse for those seeking full-time positions in a sluggish economy. Along with a host of other bad policies, an expansion of overtime rules will tend to encourage contracting and automation to replace low-skill labor where possible, and part-time hiring where necessary.
Between the payroll tax, the income tax, unemployment insurance premiums, Obamacare and other policies, government has already raised the transaction costs involved in hiring staff to the point that employment is a worse deal today for all involved than it ever was before. Add to that an expansion of inflexible, federally-mandated work rules, and the situation only becomes that much worse.
Today’s world is one in which flexibility is increasingly valued, sometimes even more than higher pay. It is also a world in which technology is changing the nature of the workplace – even letting millions of employees work outside of traditional “workplaces” altogether.
But the Obama administration is working overtime to turn back the clock to a very different era.
