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Revising Overtime Pay: An Important Issue

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The Obama Administration is moving to reverse the decision of the George W. Bush Administration to loosen policies governing overtime pay for salaried workers and add new requirements of its own. Certainly, businesses have legitimate reasons to be concerned as payroll is often one of their largest expenses. That said, it probably should be and must reflect the value of the labor consumed. After all, businesses function solely because employees provide for the interests of their employers, i.e. they do the work. In turn, employees need adequate compensation from their employers to provide for their interests, e.g. living expenses. This is the basics of capitalism and the foundation of the labor market.

In that spirit, we must recognize that overtime pay serves two purposes, which are both interests of the employee and the Nation. First, overtime discourages employers from overworking/abusing their employees. Second, it encourages employers to hire new employees as it lowers the relative cost of hiring a new worker, thus overworking current employees is less attractive. It does not discourage new hiring as employers hire, or extend work hours, when there is more work to be done due to increased demand for a company’s products or services, though the trend of abusing subcontracting may encourage this in the face of higher payroll costs.

Unfortunately, the need for salaried workers, who often find their work schedules less structured, muddies the water. For those salaried workers in mid- and high- income level fields, the value and often-specialized nature of their “labor” tends to afford them the leverage needed to negotiate an actual competitive salary. In other words, those who earn more often have greater means and options should they need to leave their current employer for a pay raise. Currently at issue is the treatment of low-end salaried workers. As they often lack the ability to pursuit their interests due to a lack of leverage at the negotiating table, this certainly is an important issue.

The Obama Administration’s effort is an attempt to prevent companies from using the so-called “white collar” exemption to suppress the wages of workers who happen to have some minor supervisorial or managerial role. Currently, a salaried worker making more than $455 a week, or about $23, 660 per year, is exempt from overtime. This means companies have the ability to force these workers to work as much as they need them to without paying them an extra dime, thus employers are encouraged to make as many employees salaried workers as possible.

Clearly, the need for labor laws stems from the need of our Country to foster a healthy economy and to use the leverage of the state to represent the interests of the American People, but businesses also have interests in labor laws. Standards for labor practices help businesses compete in healthier ways. Instead of competing by cutting labor costs, businesses are empowered by labor laws to provide adequate compensation for their employees, so they can compete by making better products and offering better services.

More importantly, salaried workers are often employees in significant positions. Shortchanging the leadership and workhorses of your business is a great way to undermine productivity and discourage talented individuals from seeking greater responsibility. Under a capitalist mindset, taking on greater responsibility and doing more work must result in a greater benefit as compared to the greater effort. If not, employers are training employees to adhere to lower standards while encouraging them to not try. For salaried workers, there is rarely any extra pay for overtime, even straight pay. Labor laws should make it competitive to pay employees adequately and this is what the goal of the Obama Administration should be.

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