Continuing to pay wages according to 19th century work assumptions makes no sense today. Still the obsolete circumstances of the long past industrial revolution still haunt American pay laws.
Before knowledge work crept into the workplace, industrial output came from capital equipment tended by unskilled workers. Carnegie’s steel mills and Ford’s assembly lines were places where quality, quantity, time and costs were all controlled by management. Employees tended the machines and followed detailed procedures under close supervision. Productivity, efficiency and profitability were the responsibility of top management. Laborers just obeyed instructions. In that environment, the length of time they served the equipment established their value as workers. Hourly pay made sense.
The basic concept behind labor agreements is that individual workers have little value, are relatively helpless alone and remain powerless unless banded together in a collective body. A unified unionized group is required to force an indifferent management to yield more profit to the otherwise unappreciated workers.
Those assumptions about work productivity and labor value do not fit in the modern world of offices filled with knowledge workers. Today’s talent are usually more than machine tenders.
Most American 21st Century workers are employed for individually controllable productivity contingent on their skills, knowledge and abilities… but lots of them still must be paid by time worked despite its frequent irrelevance to their work output.
This is important because the FLSA status of many of those knowledge workers will change if the short test salary threshold is doubled. Vaulting the short test salary threshold from $24K to $50K will dramatically expand the number receiving time and a half overtime for work beyond forty hours in a week. Instead of being treated as professionals who work “off the clock”, they will be “demoted” to the hourly wage-earner lower class who must get time and a half overtime for work beyond forty hours in a week. States with more generous rules will surely update their regulations, too.
All those proposed changes to current pay laws will increase labor costs without adding any value to employee work output. That is a recipe for trouble on both the macroeconomic and microeconomic levels.
There is a powerful contradiction between what our society says about the nobility of labor and the antiquated laws that compel companies to depreciate their valued employees. Maybe those are strong words, but government rules that require wages to be directly tied to the time spent in harness rather than some other output value seem almost insulting. When exempt from those regulations, workers are entitled to full salary without reduction for time not worked. Under the proposed changes, their pay can be cut if they miss work; they are no longer considered worthy of their full salary if absent from where they are chained while management flogs them. A bit of hyperbole there, of course, but some employers will act that way.
Perhaps the variation in hourly base rates will suffice to compensate for those new circumstances. More skilled workers will still get a higher wage… maybe. How will past salaries will be converted to hourly equivalents? Think about all the options that would either please or upset workers once they are paid by the hour rather than at a fixed salary rate like now. The hours worked …an irrelevant non-issue now …will become critical to their incomes. This will be a very complex challenge for employees, compensation people and their management.
Isn’t it encouraging to realize that we face a lot more work in the future?
E. James (Jim) Brennan is an independent consultant with extensive total rewards experience, specializing in job evaluation, market pricing and pay budget distribution. After HR corporate jobs in chemical/pharmaceutical manufacturing, he consulted at retail, government, energy, IT, tax-exempt and other industries throughout North America before becoming Senior Associate of pay survey software publisher ERI until 2015. A prolific writer (author of the Performance Management Workbook) and speaker, he gave expert witness testimony in many reasonable executive compensation cases both for and against the Internal Revenue Service. Jim also serves on the Advisory Board of the Compensation and Benefits Review.
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Indeed the new regulations will have unintended consequences that are obvious to the practitioners of our craft, but completely opaque to those promulgating the rules.
Posted by: Scott B | 08/17/2015 at 02:44 PM
Correct, Scott. The more things change, the more they stay the same.
Posted by: E. James (Jim) Brennan | 08/18/2015 at 03:44 PM