Obama has decided, once again, that there is such a thing as
a free lunch. He is proposing new
regulations that would mandate overtime pay for certain job
classifications. There are a lot
of things wrong with this proposal, but unfortunately some Americans still
believe in the dream of a government-provided free lunch.
First, aside from the merits or faults of the actual
proposal, how is Obama going to enact these changes? He needs the approval of Congress, right?
Actually, Obama is planning to make this change through the
Department of Labor. He wants to
avoid the mess of actually getting approval from your so-called
This is one of the major problems with Washington DC. Congress will pass a law that delegates
power to the executive branch, where the president then delegates that power to
one of the bureaucracies, such as the Department of Labor.
It is little realized that most of the laws and regulations
that we are subjected to are not actually written and voted on by
Congress. The thousands of new
pages of laws and regulations that go into effect each year are written and
implemented outside of Congress.
As a side note, this is not just a recent thing with
Obama. It was done under George W.
Bush and most prior presidents, particularly of the 20th
century. In fact, this change in
overtime pay would be based on the authority of the 1938 Fair Labor Standards
Act. This is not surprising given
the fact that the American welfare state really got traction under FDR.
Does Mandated Overtime
Aside from the practice of how these new regulations will be
implemented, are the changes themselves a good thing?
Before you get too excited that your employer will have to
start paying you overtime, first realize that this is limited to certain job
classifications and salaries. If
you are a loan officer, computer technician, or fast-food manager, then you may
get a benefit, if you meet the salary qualifications.
But even here, you have to consider that your employer may
make changes based on the new rules.
Employers are not ATMs that can just spit out more money based on the
newest government dictates.
If an employer has a large number of employees that it must
now pay for any overtime work, then you can be sure that adjustments will be
made. This could come in many
The employer may actually cut staff and let go some of its
workforce. Another possibility is
that the employer may just eliminate all overtime work. Another interesting scenario is that
employers may actually decrease the salary of these positions.
When an employer hires someone, it will generally determine
its costs associated with hiring someone versus the productivity that will be
obtained. If the costs are too
high, then the employer may not fill certain positions. But in this case, an alternative is to
reduce the base salary so that the employer can hire more people or pay for the
necessary overtime that is now mandated by the government.
The employer may or may not be able to do this, but it is a
likely outcome that the salaries for these positions will be forced down in the
marketplace because of these new rules.
Employers may not instantly cut salaries for these workers, but it may
reflect in lower future benefits, less pay raises, and lower starting salaries
for new employees.
Should There Be Any
This newest Obama dictate raises an interesting question
about overtime pay in general.
Should anyone be paid overtime?
I actually don’t have an answer for that except to say that
it should be a voluntary contract between an employee and an employer. The government should not be
interfering in this contract.
I find that this issue goes hand-in-hand with the minimum
wage laws. It is an interference
of the government between two consenting parties. Just as minimum wage laws do not require that an employer
hire someone, overtime pay laws do not require that employers offer overtime.
There may be some people who would be happy to work
overtime, just to land the job that they desire. Some employers might offer to pay overtime to its employees,
even if there were no government mandates. It can be beneficial for an employer to have an employee
work extra hours rather than having to hire additional people who may not have
the same experience or skills.
If there were no government rules about overtime pay, some
employers might offer to just pay the same rate for each additional hour
worked, instead of the government-mandated time and a half. Some employees would likely be happy
with this arrangement, being able to make some extra money. But with the expense of time and a
half, it is often not an option for most employees.
Of course, some people will always question the free
market’s ability to function. They
think that employers will control everything and abuse their employees if the
government doesn’t step in and tell them how to operate. But in actuality, it is in our current
environment, where good jobs are difficult to find, that employers are able to
demand more out of their employees simply due to the lack of other options by
If we operated in a true free market system, which would
include no laws regarding the minimum wage or overtime pay, then jobs would be
far more plentiful and there would be greater competition. When employees have more options, then
it forces employers to compete to get and retain good employees. This in itself would encourage employers
to treat employees better, which could include overtime pay, higher salaries,
or less demanding hours.
We must not delude ourselves that the government can simply
raise our living standards by implementing new laws and regulations. Our standard of living goes up due to
productivity. We will get higher
productivity in a free and competitive market, not one where the government
makes all of the rules.