May 25, 2016

Toeing the Line on Low Wage Workers

Controlling labor costs is a critical component of managing any business. Recent moves by government officials stand to make that task more challenging.

The Obama administration has announced a new rule that will require employers to pay overtime to salaried workers making less than $47,476 a year if they are asked to work more than 40 hours in a given week. Currently, workers making as little as $23,660 can be considered executive, administrative or professional personnel, thus exempt from overtime rules. Effective in December, no longer will management be able to say, “Congratulations, I am promoting you to assistant manager!” And then not say, “Oh, by the way, you’ll be working 60 hours a week for $24,000.”

How will employers respond? They may simply make the overtime payments. They may reduce employees’ base pay so their total compensation turns out about the same once the overtime is added. They may increase employees’ base pay so they remain exempt from overtime payments and can be asked to work more than 40 hours with no penalty. Or they may hire more workers and have individuals work fewer hours so they remain below the 40-hour limit. Each strategy is acceptable, and none is necessarily a boon to low-wage workers. The rule simply means that low-income salaried workers will get compensated if they have to work extra hours.

By some estimates, the new rule will actually add jobs to the overall economy. Others argue it will worsen the nation’s unemployment problem because the added cost will inhibit hiring, thus hurting the very workers it is meant to help.

That’s the same argument posed by opponents of a higher minimum wage. Economists are mixed about the wisdom of raising the minimum wage to $15 an hour, as California plans to do over the next five years. Some say companies that are forced to pay higher wages will hire fewer workers. Others say the issue is not that simple and that, done gradually, the market will have time to adjust. Ultimately, argue proponents, it’s in society’s best interest to raise the standard of living for low-wage workers, who will then help fuel consumer spending.

At the heart of both these issues are larger philosophical questions: Where is the line between a fair wage and worker exploitation? Where is the line between free market forces and overregulation? Like it or not, when the lines are blurry, it’s the government’s job to step in.

If you have an opinion on how new minimum wage and overtime rules could impact your business, I’d welcome an email at ttriplett@metalcenternews.com.


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Monday, December 18, 2017