Reform of overtime rules not how to address income inequality

In his book, “The Leviathan,” philosopher Thomas Hobbes described what human life would be without a social contract binding people together: “nasty, brutish and short.”

Joseph Williams, in a recent article in “The Atlantic” magazine, paraphrased Hobbes when he described his life as a retail worker as “nasty, brutish and cheap.”

Retailing is one of a handful of American industries that are dependent on human labor and dominated by its costs. “Brutish” is probably an exaggeration, but there is little doubt that jobs in retail and other industries dependent on entry level labor can often be both demanding and unrewarding at the same time.

At the same time it is also true that industries such as retailing, restaurants, hotels and agriculture provide millions of Americans with jobs and incomes — and often their first workplace experience. And in the vast majority of workplaces these workers are treated fairly, and superior performance is recognized and to some degree rewarded.

Few entry-level jobs were intended to be lifetime occupations, largely because the steep learning curve tends to cap productivity and place an upper limit on the value that experience can contribute. The economic underpinning for supporting a family of four on a career restocking shelves or bagging groceries simply isn’t there.

Industries dependent on entry-level labor are often low-margin operations, where profit is earned only through high-volume sales and hawk-like attention to costs. If an outside force such as a labor union or a government mandate raises the cost of labor, then, it usually cannot be simply absorbed within the existing business structure. It is a significant change agent and, as the expression goes, “something’s gotta give.” That something is often the number of jobs.

The most recent government mandate affecting labor costs is a presidential memorandum directing the Department of Labor to revise the Fair Labor Standards Act overtime rules that provide exemptions covering some “white collar” workers.

Under the present federal workplace regulations, hourly work performed beyond forty hours per week must be compensated to include a premium of 50 percent of the normal rate, in other words, time-and-a-half. (There are no current federal rules covering private workplace “golden time,” which is at least double pay for overtime and a matter dealt with in collective bargaining agreements.)

In addition to the many specific occupational exemptions under these regulations, there is a general exemption for what are called professional workers and those having managerial responsibilities. Generally, though, anyone currently paid less than $23,660 per year would not qualify for that exemption irrespective of their job responsibilities. They would be entitled to time-and-a-half for any overtime worked.

It is not clear what rules the Department of Labor may change, or how much they will change them, but based on remarks made by President Obama it is likely that the threshold for white collar exemptions will be moved upward from $23,660 to perhaps $50,000.

The president’s remarks on this subject, unfortunately, have been both puzzling and troubling. Some of the examples of workplace overtime pay abuses he cited, for example, were focused on computer professionals who are already covered in a separate exemption within the white collar worker rules.

Other comments he made appear to focus on workplace abuses like employers requiring workers to perform jobs “off the clock” and, more generally, failing to pay employees at all, let alone overtime, for work required and done. This has been a frequently litigated issue and while there are gray areas with certain jobs, employers have to pay for work they require to be performed.

Despite this, workplace abuse by demanding “off the clock” work can certainly be a genuine problem, and it is more likely to appear in tough job markets. Still, it is not a problem that will be remedied by redefining the overtime exemption rules.

Workplace fairness has always been the goal of the rules under the Fair Labor Standards Act, but fairness is a social standard that can be difficult to define in a law or a regulation. The federal workplace regulations in this area have already constructed a maze that would sometimes confound even the most experienced rat. Hopefully, the Department of Labor will simplify the rules as it reviews the situation.

Remarks by the president and others also hint that the new overtime proposal is part of a larger effort to address income inequality through the workplace. Let’s hope not.

Workplace law and workplace economics are inextricably bound together and changing the rules will have costs as well as benefits. Unless we are honest about those costs, especially in terms of job losses, changing the law enough to have a significant impact on income inequality has “nasty, brutish and doomed” written all over it.

More in Herald Business Journal

Exec director of Future of Flight in Mukilteo stepping down

A former board president will temporarily lead Snohomish County’s most popular tourism attraction.

Seafood producer Keyport moves corporate HQ to Edmonds

The family business sees the city as business friendly — and able to accommodate expansion.

Tax bill will help fund 5,000 layoffs, Kimberly-Clark says

Executives declined to say which factories the company would be closing.

Ex-Boeing executive Ray Conner joins Alaska Air board

Alaska Air Group said his appointment affirms the company’s commitment to its Northwest roots.

AI can read! Tech firms race to smarten up thinking machines

“A long way from computers being able to read … general text in the same way that humans can.”

Peoples, HomeStreet banks bump lowest salaries after tax cut

The banks with Snohomish County branches will raise minimum salaries for employees to $15 an hour.

Amazon opens store with no cashiers, lines or registers

The Seattle store allows shoppers to use a smartphone app to pay for items they want.

The expansion at Angel of the Winds Casino is expected to add room for up to 300 more slot machines and 16 new table games. (Courtesy Angel of the Winds)
Groundbreaking held for multimillion-dollar casino expansion

Angel of the Winds will gain up to 300 more slot machines, a 200-seat buffet and more.

Trump hits solar panels, washing machines with tariffs

The administration cast the decisions as part of his pledge to put American companies and jobs first.

Most Read