President Obama last week expanded federal rules requiring American employers to pay overtime. In the press release the President said “So we’re going to update those overtime rules to restore that basic principle that if you have to work more, you should be able to earn more.”
What this means is that businesses that could formerly pay fixed salaries to some managerial workers earning over $23,660 will now be forced to comply with federal overtime regulations on workers earning perhaps as much as $50,000 per year.
But if this is a “basic principle” shouldn’t it apply to everyone? Los Angeles pays firefighters overtime though the average total compensation is close to $250,000 per year (article; cash pay was $142,000/year but they also get benefits including a pension starting at age 50 of 90 percent of their previous income).
Let’s consider Cameron Kennedy, a working mom featured in this Washington Post story. McKinsey pays her $350,000 per year, presumably a fair wage for her skills. If they make her work more than 40 hours/week because they don’t want to hire another $350k/year worker, why shouldn’t McKinsey pay her overtime? Hasn’t she earned it as much as anyone else who has worked more than 40 hours?
If it makes sense to impose a “basic principle” from Washington, D.C., what is the rationale for an income cap?
[And separately, can companies evade these new regulations by limiting workers to 40 hours/week? Suppose that Business A has someone working 60 hours/week and getting paid a straight $10/hour = $600. Meanwhile Business B has an identical employee. Under the new regulation Business A would have to pay 40*$10 = $400 plus 20*$15 = $300 or $700, right? But couldn’t the companies agree that they will swap these workers for the last 20 hours/week? So now there is no worker who works more than 40 hours/week. People are probably at their most efficient for the first 30 hours per week on a job, so wouldn’t we expect a reshuffling of the workforce so that no company employs a person for more than 30 hours per week? Then employers don’t have to provide health insurance under the Obamacare laws and they also don’t have to pay overtime under the new overtime regulations.]