Home
/
RELIGION & LIBERTY ONLINE
/
5 Ways Obama’s New Overtime Rule Will Harm Workers
5 Ways Obama’s New Overtime Rule Will Harm Workers
Jul 3, 2025 8:54 PM

In announcing the Obama administration’s new overtime rule (for more on this news, see this explainer), Vice President Joe Biden panies will “face a choice” to either pay their workers for the overtime that they work, or cap the hours that their salaried workers making below $47,500 at 40 hours each work week.

“Either way, the worker wins,” Biden said.

Biden has held political office for more than four decades, and yet he has still not learned one of the most basic and important concept in economic and political policy: consider that which is unseen.

As Frederick Bastiat explained 125 years before Biden first took office,

In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause—it is seen. The others unfold in succession–they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference—the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee.

If Biden, President Obama, and the others in the administration were better economists, they might have forseen the following five consequences of this disastrous policy:

1.It will cause low-productivity workers to lose their jobs —Imagine you’re an employer faced with a choice: you can pay an employee $913 a week or you can pay them $1,084 a week for the same amount of work. Which would you choose? All things being equal, you’d naturally pay the $913 and save nearly $9,000 a year in labor costs.

Now imagine you are an employee making $913 a week, but it takes you 45 hours a week to plish what some others can do in 40. What happens to you under the new FLSA rule? You lose your job. Rather than pay you for five extra hours of overtime, the employer will simply replace you with someone who can get the work done in under 40 hours.

2. It will lead to reductions in salaries —Let’s again consider the scenario above, but this time assume that the workload takes 45 hours a week. Previously, a single salaried employee was getting paid $913 a week plete the task. But now the cost would be $1,084. How can the employer continue to pay $913? By hiring two part-time employees.

This expectation of employer behavior has been repeatedly confirmed.Donald J. Boudreaux and Liya Palagashvili of the Mercator Center observe that, “Studies in the United States have found that employers reacted to the introduction of overtime payment rules by decreasing the base salaries of affected workers. In Japan, researchers have found that workers who were not exempt from overtime payment rules earned on average a lower base salary than their exempt counterparts, and often also worked shorter hours.”

3. It will lead to more lawsuits —There is one group that is sure to benefit from the new rule: litigators.

Compliance with FLSA rules on overtimes is already difficult and costly. AsKira Bindrim notes, “The number of FLSA cases filed in US district courts has already skyrocketed, to 8,781 in 2015 from 4,039 a decade earlier. Overall, the FLSA caseload has increased by more than 400% since 1996.”

The average cost to settle a case: $5.3 million.

To avoid paying millions, most employers will err on the side of caution by taking actions that will likely hurt employees. Still, the increase in affected workers means thatovertime lawsuits will increase substantially, making lawyers richer panies — and the people who work for them — much poorer.

4. It will lead to fewer salaried positions —Some employers are willing to pay an employee a fixed salary (plus benefits) because it is easier to account for a fixed labor costs than a variable costs that fluctuates and spikes due to changes in the factors of labor (e.g., seasonal increase in sales).

But the Obama administration has made that less attractive for employers. They now have a strong incentive to eliminate certain salaried positions and replace them with an hourly wage. As House Speaker Paul Ryan said, “By mandating overtime pay at a much higher salary threshold, many small businesses and non-profits will simply be unable to afford skilled workers and be forced to eliminate salaried plete with benefits, altogether.”

5. It willincrease college tuition costs and student loan debt — As Linda Harig, vice president of human resources for the University of Tennessee, tells the Washington Post, the university will “need to spend an additional $18 million to afford overtime pay for employees who would e eligible under the new guidelines, such as admission staff, hall directors and people with post-doctoral positions.” That’s the equivalent of a 4.3 percent increase in tuition.

Colleges will have to pay more in salaries, which requires raising the cost of tuition. And since so many students are having to take loans out to pay for their education, their debt load will increase.

These are but five obvious examples of the ways the worker doesn’t “win.” There are numerous others that can just as easily be foreseen.

So why then does the Obama administration not acknowledge this reality? Do they truly not see how this rule will detrimentally affect workers? Or are they simply more interested in giving the appearance of helping workers rather than taking actions that will actually improve the conditions of the working class?

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
The bright side of the trade war with China?
This year marks the 40th anniversary of one of the most consequential anti-poverty programs in human history. Now, there is evidence that its spillover effects may lift millions more out of dire need. In 1978, 18 farmers from the Chinese village of Xiaogang secretly signed “the document that changed the world.” Madsen Pirie of the Adam Smith Institute writes: A few years earlier they had seen 67 of their 120 population starve to death in the “Great Leap Forward” Now...
New Issue of the Journal of Markets & Morality (Vol. 21, No. 1)
The newest issue of the Journal of Markets & Morality has been published online and print copies are ing. This issue is a theme issue on “The Role of Religion in a Free Society,” with guest editors Richard Epstein and Mario Rizzo of New York University School of Law, and Michael McConnell of Stanford Law School. Contributions range from legal analyses to theoretical forays to fascinating case studies all centered on the question of the nature, limits, role, and rights...
Sam Brownback hosts first-ever State Department summit on religious liberty
The fight for religious liberty has intensified in America, whether among retail giants,restaurant chains,bakers and florists,nuns, or other imminent obstructionson the path paved byObergefell vs. Hodges. Meanwhile, intense religious persecution continues to grow around the globe. The appointment of Justice Neil Gorsuch to the Supreme Court gave room for optimism here at home. More recently, given the recent changes in the State Department — namely, the appointment of CIA director Mike Pompeo as secretary of state and the confirmation of...
Whether welfare recipients should work is a question of values
Should people who receive welfare benefits from the government be required to work? There are at least two ways to consider that question. The first is from the perspective of technical economics. Do work requirements lead to higher rates of employment for welfare beneficiaries? Does a lack of such requirements discourage work? The second is a matter of moral philosophy. Michael R. Strain argues that it’s the latter approach that should be our starting point when considering welfare policy: Whom...
What do banks do?
Note: This is post #88 in a weekly video series on basic economics. Borrowing and saving plays an essential role in our economy, and banks often serve as their primary link. But how exactly do banks operate? In this video by Marginal Revolution University, Alex Tabarrok explains how banks serve as financial intermediaries, how they turn savings into loans, and how they make loans as productive as possible. (If you find the pace of the videos too slow, I’d mend...
The U.S. is far more religious than other wealthy nations
Some countries are rich and some countries are religious. But the U.S. is the only country that has higher-than-average levels of both prayer and wealth, according to a new study by Pew Research. In 101 other countries surveyed that have a gross domestic product of more than $30,000 per person, fewer than 40 percent of adults say they pray every day.As the survey notes,more than half of American adults (55 percent) say they pray pared with 25 percent in Canada,...
Why we need virtue education
“The wider culture needs virtue education, because a free society relies on certain bedrock moral principles being inculcated and incarnated,” says Josh Herring in this week’s Acton Commentary. We need business men, doctors, lawyers, plumbers, electricians, and grocers who act with the honesty which allows the free market to thrive. Virtue, character, ethics – these things matter profoundly, and it is one of the tasks of education to transfer the system of values from one generation to the next. And...
Welfare states cultivate the sin of sloth
Alfred Tennyson wrote, “In the Spring a young man’s fancy lightly turns to thoughts of love.” But each summer“in Mediterranean countries, the youth seemto be haunted by the same pressing question: ‘Will i get a proper job?'”writes Mihail Neamtu at Acton’sReligion & Liberty Transatlantic website. Neamtu, a public intellectual from Romania, writes in his penetrating essay: In Greece, unemployment stands at 42.9 percent; in Spain, unemployment is 35 percent; in Italy, it is more than 30 percent. Compared to the...
Unemployment as economic-spiritual indicator — July 2018 report
Series Note: Jobs are one of the most important aspects of a morally functioning economy. They help us serve the needs of our neighbors and lead to human flourishing both for the individual and munities. Conversely, not having a job can adversely affect spiritual and psychological well-being of individuals and families. Because unemployment is a spiritual problem, Christians in America need to understand and be aware of the monthly data on employment. Each month highlight the latest numbers we need...
Why farm subsidies hurt small farmers
Have you ever listened to a classical symphony and thought the music needed more distortion? Or have you ever read a newspaper and believed it would have been improved if it had more disinformation? Most of us don’t appreciate distortion in our music or disinformation in our news. Yet far too many do favor distortion and disinformation when es to pricing. Prices signal information in markets. A “market” is a summary term for a variety of voluntary exchange for modities...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved