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 18, 2025 7:53 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
How were people On Call in Culture 165 years ago?
What is so special about 1837? That was the year Abraham Kuyper was born. September 29th is his 165th birthday. So we thought we would go back to 1837 and see how people were being On Call in Culture back then. We don’t know if they were all believers on a mission to bless the world, but by seeing what was going on 165 years ago, we hope you are encouraged to engage your world in 2012! How did people...
On Call with Dr. Pamela Casson
Dr. Pamela Casson, a pediatrician in Colorado Springs, knows what it means literally to be “On Call.” This week she shares with us in this video interview with Jon Hirst how she sees God working through her in her work with families, children and the world around her. Thank you Pamela for giving us an inside look at how you see your work as blessing the world. ...
Want to Help the Poor? Promote a Free Market in Health Care
Want to help the poor? Promote a free market in health care. That’s the argument made by John C. Goodman, author of the new book Priceless: Curing the Healthcare Crisis. Timothy Dalrymple recently talked with Goodman about the best approach for restoring free-market pricing mechanisms into the market for medical care and health insurance: Aren’t there some people, however, who have little of money and lots of time, and would prefer to wait in order to receive cheaper care? There...
Markets and culture: A time to play, a time to pray
Faced with the prospect of a professional athletic career, a nearly-half million dollar salary, and a perfect lady, what’s not to like? Apparently, for Grant Desme, it was the noise and unrest of the world. Can a culture of life and the noise and tumult of the marketplace co-exist? Rev. Robert Sirico, reflecting on this, says they can, so long as it is not a place where: [C]apitalism…places the human person at the mercy of blind economic forces…What we propose,...
Is it really ‘aid’ if it goes to relatively wealthy nations?
Alan Duncan, an aid minister in the UK, says his government is “forced” to hand over large amounts of money to the EU’s foreign aid budget, but has no say in how the money is spent. The problem is that much of the $2 billion+ “aid” money (one-sixth of the British budget) goes to projects such as making a Moroccan water park more eco-friendly, an art project in St. Petersburg, and building a hotel and plex in Barbados. Britain’s International...
Stop Apologizing for Our Liberties
You cannot apologize to a fanatic, says Lee Harris. It only serves to convince him that he was right all along: The last few weeks have witnessed a peculiar and disturbing spectacle: An American administration that has spent a great deal of time and energy apologizing for our liberties—in particular, for what many would regard as the foundation of all our other liberties, namely, the freedom to express our minds as we see fit. This signature freedom, of which Americans...
Did 2,362 Millionaires Get Unemployment Checks in 2009? (Answer: Yes they did.)
The Congressional Research Service (CRS), a group that works exclusively for the U.S. Congress, issued a report with one of the greatest titles I’ve ever seen on a government document: Receipt of Unemployment Insurance by e Unemployed Workers (“Millionaires”) Now the first nine words are nothing special, typical policy-wonk speak. But whoever added in the word “millionaires” with scare quotes and parentheses is a genius. Most people would have been nodding off around the word “Insurance” but seeing millionaires (that’s...
Rev. Sirico on Life, Work, and Human Flourishing
J.Q. Tomanek of Ignitum Today interviewed Rev. Sirico about life, work, human flourishing, and his new book, Defending the Free Market: JQ Tomanek: Back in the day, holiness was misinterpreted as a cleric or religious life thing. How can a lay Catholic practice their faith? What are some ways to sanctify our work as lay Catholics? Is “ora et labora” just a monk thing? Reverend Sirico: Yes, religious people are often tempted to e so “heavenly minded they are no...
Counting the Profit of a Third Party Choice
Joe Carter recently highlighted the discussion at Ethika Politika, the journal of the Center for Morality in Public Life, about the value of (not) voting, particularly the suggestion by Andrew Haines that in some cases there is a moral duty not to vote. This morning I respond with an analysis of the consequences of not voting, ultimately arguing that one must not neglect to count the cost of abstaining to vote for any particular office. One issue, however, that I...
Dodd-Frank: The Other Serious Threat
At least es at us head on. The greater legislative threat may be the one that most Americans have never heard of. Economist Scott Powell and Acton friend Jay Richards explain in a new piece in Barron’s: While Obamacare received more attention, the Wall Street Reform and Consumer Protection Act, also known as Dodd-Frank after its Senate and House sponsors, … unleashed a new regulatory body, the Consumer Financial Protection Bureau, to operate with unprecedented power. Dodd-Frank became law in...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved