President Obama’s policies have shifted our economy to one that relies more on part-time work, even as workers would prefer full-time jobs. Don’t all clap at once!
We know that ObamaCare’s redefinition of full-time to fewer than 30 hours each week has created a cadre of so-called “29ers” – workers whose hours have been capped at 29 per week to avoid triggering the employer mandate.
The president's latest plan to expand the number of workers who qualify for overtime pay may have similar unintended consequences. Under the new rules, some 4.6 million more workers –salaried employees earning less than $50,400 annually, or about $970 a week—would be eligible for time-and-a-half pay when they work more than 40 hours a week. If you’re a salaried employee thinking that your paycheck is about to get fatter, think again.
Some economists and businesses say that instead of paying their salaried workers overtime, companies will look for strategies to keep total compensation of salaried capped such as limiting their hours and using more part-time workers.
The National Retail Federation, an association representing stories and retailers, is evaluating the rules but suggests that they are not the way to achieve the benefits for workers President Obama says he wants. Instead the President's new rules would limit employees’ hours and block promotions because there’s no “magic pot of money” that allows employers to pay workers more. Wishful thinking becomes reality only in cartoons.
The retail federation found in a report that retailers alone would hire 117,500 part-time workers as a result of raising the threshold to $984 a week – a little higher than the Administration’s proposal.
Some economists on the right agree, but their more liberal colleagues contend that any jobs are good jobs. They implicitly acknowledge that this rule will not help full-time job creation, but are quick to celebrate the boost in part-time workers.
I’d like to ask American workers whether they’d rather the Administration settle for creating a whole load of part-time jobs rather over full-time jobs (the alternative should not be settling for no jobs). I’m pretty sure they’d overwhelmingly reject this proposal based on these outcomes.
The Wall Street Journal has more:
The rule “might open up more work for inexperienced workers,” said Michael Mabry, chief operating officer of Mooyah Burgers, Fries & Shakes, a chain of more than 70 fast-food restaurants based in Plano, Texas. “It’s going to be a balance between how many inexperienced, entry-level workers you can bring in versus the need to maintain a high level of guest service,” Mr. Mabry said. He stressed that the company is still evaluating its options and won’t take any action until the rule is finalized.
He said the proposed change could upend Mooyah’s business model of operating stores with a smaller number of more experienced employees, including 30 to 40 assistant mangers who could be eligible for overtime pay under the new rule.
…
A number of economists also predict that the new rule, if implemented, would expand the roster of lower-paid workers.
“Since employers will want to avoid paying time-and-a-half for routine work, they may opt to limit overtime work and hire new workers to make up the difference,” Goldman Sachs economists said in a note to clients this month.
Goldman Sachs economists estimated the proposed rule would create about 120,000 new jobs in the year after it goes into effect. But the changes wouldn’t exert any meaningful upward pressure on wages, they concluded. Average hourly earnings have increased about 2% annually in recent years, staying just ahead of modest inflation.
…
Not all economists agree the overtime rule will spur hiring. Jeffrey Miron, economist at the libertarian Cato Institute, predicts employers will instead move to lower the pay for salaried staff who frequently work overtime so that their total compensation is similar to what current managers earn. “Ultimately you’ll get back to where we were,” he said.
…
Potentially lost in the debate over the overtime rules is the original purpose of the law, said Daniel Hamermesh, an economist at the University of Texas. In the 1930s, Congress mandated overtime pay not to boost wages, but to encourage companies to hire more workers by making it expensive to require existing employees to work extended hours.
If government forces employers to cap hours and block promotions for enterprising salaried employees such as managers and assistant managers, it will stunt their career growth and limit their earnings potential. This will be particularly important for young people who look forward to decades in the labor force but will now sometimes rise more slowly.
The President waving his magic pen will not make businesses more able to pay what he wants and still be solvent. Government mandates are not the best solutions to the economic and social problems plaguing us. We would do better if the government