Tuesday, August 24, 2004

Overtime - What They're Saying

There has been a fair amount of press coverage of the new overtime rules from the Department of Labor that took effect this week, but the range of opinions has been strangely limited. I checked the New York Times, Washington Post, USA Today, and the LA Times for stories on the topic. I found a few quotes from politicians, labor leaders, and some others, and not a single op-ed piece. The Kerry campaign blasted the changes as being a "a shameful assault on the paychecks of hard-working Americans." The biggest disagreement seems to be over how many workers will be affected by the change (somewhere between 107,000 and 6 million).

I found virtually nothing acknowledging that the labor market is, in fact, a market. Most of the opinions expressed seem imply that empoyers will just take away the overtime premiums and pocket them, with no compensating effects on wages or hours, although there are a few mentions of the idea that overtime pay encourages employers to create new jobs rather than increasing worker hours. In fact, according to this story in the LA Times, even such a suggestion might be politically incorrect:

Many provisions in the draft plan that had become political lightning rods were removed or changed.... Gone is language suggesting that employers could reduce overtime costs by cutting the hourly wages of newly eligible workers and adding back the overtime to equal the original salary.
The lone opinon piece I found is this "Ask an Expert" column from Steve Strauss in USA Today's "Money" section. He also takes a dim view of the changes:
Overtime pay serves two useful functions. First, it allows applicable employees to supplement their income. According to an analysis by the Economic Policy Institute, overtime pay accounts for up to 25% of weekly earnings of eligible employees, with the average amount being $161.

Secondly, overtime pay serves a useful position in the overall economy. By requiring overtime, the federal government crafts an incentive for busy employers to create new jobs; rather than pay overtime, a new employee can be brought on. So the old system helped in many ways.

I found almost no quotes in favor of the change, although the very end of this Washington Post article did have this:
But the Department of Labor disputes that analysis and says it changed the rules because they desperately needed updating. The old rules did not mesh with the new economy, causing increased litigation, officials argued. Overtime class-action suits have doubled since 1997 and outnumber discrimination suits for the first time. Labor recovered $212 million in back wages in fiscal 2003
Most interesting for me as an economist, I found not a single quote from an economist. Economists seem to have surprisingly little to say on this topic, for reason's I'll comment on in a future post.

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