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03/21/2014

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I expect that employers who can't take the hit or pass the additional cost through to their customers will downwardly adjust base pay so that new base + OT will equal old base. Or they'll split a 50 hours + benefits job into 2 x 25 hours with no benefits jobs. Our ruling class seems incapable of grasping the concept of perverse incentives.

Thanks for the interesting comments, Tony.

Cutting base pay to yield the same total comp after new overtime costs is possible but hazardous. Dropping the guaranteed pay to a rate lower than the old salary divided by the hours in the standard work week could damage morale. It also could constitute a change in the employee value proposition that might justify a quit that could qualify for unemployment compensation charged against the firm that "cut their pay."

Overtime usually occurs precisely because the employer can't accurately predict the need for an employee at a particular time, and that complicates both of your options, too. The anticipated overtime assumed for calculating a lower base but equal TC might never occur. Even if the enterprise did schedule two part-time workers, there still might not be any assurance one would be present when extra work must be done. Hard to tell.

Any change to status quo pay situations is disruptive.

This was good, although Jim managed to leave me disappointed with his treatment of this topic on two scores (a notably infrequent transgression I might add . . .).

First, he "scooped me" on this topic - since I also had it targeted for a topical treatment in a future article.

On a less personal and vindictive-sounding level, I wished Jim had hinted at the original purpose for FLSA, and the president's possible motivations for modifying the rules. Oh, that's easy - it was to protect employees and ensure they get more income through overtime earnings . . . right? Uh, of course not.

The FLSA was originally passed to afford employees some protections (child labor, etc.), but the overtime provision was intended to help expand employment in the still post-Depression era - by making the $$$ penalties on employers, such that it was more cost-effective to simply hire more workers, rather than pay overtime.

At a time when unemployment and jobs creation needs all the stimulus it can get, what might the effect be of loosening the OT eligibility rules?

I'm shocked, just SHOCKed! ...at finding myself so effectively convicted of being insufficiently outrageous in my dispassionate treatment of a weighty topic. Now, if I worked for the U.S. Federal government, THEN I would have a perfect good excuse for refraining from politically sensitive comments; but I stand defenseless against valid accusations of impartiality and professional objectivity. (Two can play at sarcasm, you see.)

On the timeliness issue, well... Turnabout is fair play, Chris. Since you scooped me on "Show Me the Bitcoins," I considered myself entitled to post faster, for a change. My already-outlined draft article on that non-currency topic had to be revised lest my "Bitcoins II" prove to be a pitiful shadow of your original gem. It should appear next month.

"Dropping the guaranteed pay to a rate lower than the old salary divided by the hours in the standard work week could damage morale."

To be brutally frank, $25k employees are as fungible as dollar bills. Turnover is little more than an inconvenience. (I'd nominate Mickey D's as Exhibit A for my contention).

"The anticipated overtime assumed for calculating a lower base but equal TC might never occur."

A few years' data would give you a pretty good idea of the demand function.

If employers react that way, suspect there will be severe backlash, one way or another, worse than the now-ubiquitous offshoring has ever earned. Cost-shifting does have a limit, however. Just where that IS remains to be seen.

Why doesn't one state simply rush ahead and revise THEIR rules in accord with the president's proposed ideas? Any state can do it much faster. That would supply a perfect Beta test environment to fine-tune the concept before the Feds could ever act.

The employees at McDonald's already are paid overtime by law. This change affects people now exempt from OT pay.

Think that was Tony's point, Herb. Despite the low guaranteed base pay at some employers, they manage to continue doing business while suffering what is probably very high turnover rates. I've heard it said that some fast food enterprises would go out of business WITHOUT such easily replaced minimally skilled workers who are happy to leave for better jobs at higher pay once they have established a credible work history record. Keeping the jobs simple enough to master swiftly with no background training or experience lets them survive always-new workers who depart before they would expect substantially more than minimum wages. Q.E.D, proving his phrase: "Turnover is little more than an inconvenience."

Might making the currently exempt supervisors or managers OT-eligible change that situation? We may find out.

I for one, welcome our new robot overlords...

http://singularityhub.com/2013/01/22/robot-serves-up-340-hamburgers-per-hour/

More like a robot cook. If Robby the Robot were the cashier/server, too, the entire eatery experience could be automated. Same thing the auto industry has been trying to do, in order to reduce their much higher wage cost impact on product pricing. Replacing people with machines is ONE way to avoid higher labor costs. Investing in durable equipment might be seen as cheaper than incurring greater payroll expenses and legal liabilities. Shareholders don't seem to care much about being "people-friendly" when stock dividends are involved.

There's so many ways to get around the minimum wage and overtime laws they hardly disturb companies. OT is the biggest rip-off to labor.It sucks workers in to living on more then they usually get. The benefits do not go up with the extra hours, making it cheaper to work people overtime than hire new, particularly if you don't even have to pay them overtime.

Judy: Doesn't that logic apply equally to bonuses, incentives and other forms of variable pay? Those eligible for contingent awards often have even less ability to reliably predict receipt of those extras income amounts. Don't hear many people protesting that "extra pay isn't good for them."

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