Home
/
RELIGION & LIBERTY ONLINE
/
5 Ways Obama’s New Overtime Rule Will Harm Workers
5 Ways Obama’s New Overtime Rule Will Harm Workers
Apr 2, 2025 8:53 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
Be fruitful, multiply, and grow the economy
In one of the most memorable mid-1990s episodes of The Simpsons, the curmudgeonly misanthrope Charles Montgomery Burns achieves a lifelong dream: Since the beginning of time, man has yearned to destroy the sun. I shall do the next best thing: block it out. While Mr. Burns had no use for our nearest star, the other residents Springfield were dismayed by the citywide sun-block. They understood, as Steve Martin once said, that “A day without sunshine is like, you know, night.”...
Ignoring the invisible
I have been thinking a lot about all of the invisible things around us, important foundational things that we take for granted. Because they don’t immediately manifest themselves to our attention we can forget about them if we are not careful. There are different layers of “invisible” things or institutions or concepts that make life go on and that undergird our economic, political, and social life. One of the characteristics of these invisible things is that we don’t necessarily need...
Latin America falls behind—again
Economic globalization has brought many economic benefits to the planet, but it’s also true that the benefits have been uneven. One continent which has lagged behind much of the rest of the world is Latin America. As a recent Wall Street Journal article entitled “Latin America Hangs On to Its Economic Gloom” pointed out: This year, once again, Latin America is shaping up as an economic disappointment. Brazil’s economy likely shrank slightly in the year’s first half, and Mexico’s didn’t...
Explainer: What does it mean to prorogue Parliament?
Prime Minister Boris Johnson has set up a collision with Parliament over the likelihood of a no-deal Brexit, as he announced that he intends to prorogue Parliament next month. Here are the facts you need to know. What does it mean to “prorogue” Parliament? To prorogue Parliament resets the session, as Members of Parliament take an extended recess. All pending legislation is wiped clean, except for measures MPs voted to carry over. The traditionalQueen’s Speechthen rings in a new session...
Drucker on the ‘master organization’ and the totalitarian conceit
This is the fourth in a series of essayson Peter Drucker’s early works. It was sometimes said of fascists that they “made the trains run on time.” In The End of Economic Man, Peter Drucker saw that fascists “proved” their fitness through effective organization. Technical details substituted for real social ends. But the real power of fascist organization has to do with its ambition prehensiveness. In effect, the fascist state holds up the political party and insists that all be...
Acton Line podcast: What is woke capitalism? Daniel J. Mahoney on ‘The Idol of Our Age’
From Gillette to Pepsi, panies are starting to market their products by advocating for social justice issues, signaling to consumers that they are “woke.” Is ‘woke capitalism’ a trend that’s truly new in the market? Is there a place for businesses ment on social issues? Acton’s president and co-founder, Rev. Robert Sirico, explains. Afterwards, Daniel J. Mahoney, professor of political science at Assumption College speaks about his newest book, “The Idol of our Age: How the Religion of Humanity Subverts...
Abba Moses on the Christian vocation
Today in the Orthodox Church memorate St. Moses the Ethiopian, also simply known as St. Moses the Black. His life and teachings have enriched the Christian spiritual tradition for more than 1,600 years, and he has something to teach us about the concept of vocation. Abba Moses was one of the desert fathers, the first Christian monks who lived in the wilderness of ancient Egypt and dedicated their lives to the pursuit of virtue and holiness. According to tradition, he...
The reason America’s poor are richer than most Europeans
The U.S. has diverged from the OECD approach to economic and energy issues that critics called this weekend’s G7 Summit the “G6-plus-one.” However, a new study shows America’s less regulated, less regimented economy has generated such abundance that the poorest 20 percent of Americans are more prosperous than the average European. “If the U.S. ‘poor’ were a nation, it would be one of the world’s richest,” writes Jim Agresti of Just Facts in a new article for the Acton Institute’s...
Michael Novak and the ‘crisis of capitalism’
Jordan Ballor recently brought to my attention this remarkable passage from Michael Novak’s The Spirit of Democratic Capitalism, “Our moral and cultural traditions have not kept pace with our economic possibilities. We try to match new demands with a spiritual life not designed for them.” What we think of as ‘democratic capitalism,’ and the economic and political theories which under-gird it, arose out of a tradition of moral and theological reflection on the institutions, ethics, and law of early modern...
Virtue and the Lake Wobegon effect
During the mid-1990s I spent a tour of duty as a Marine recruiter in southwestern Washington State. One of my primary tasks was to give talks at local high schools, but because many of the guidance counselors were not exactly pro-military, I was expected to give generic “motivational” speeches. I soon discovered my idea of what constituted a motivational speech was not widely shared. “Your parents and teachers have not been straight-forward with you,” I told the students in my...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved