by Mitch Kokai
Senior Political Analyst, John Locke Foundation
George Leef’s latest column for Forbes probes the ongoing negative impact of the 1938 Fair Labor Standards Act. Leef focuses first on President Obama’s effort to expand FLSA overtime rules to more workers.
Let’s consider Obama’s gambit on overtime pay. The vaguely worded FLSA says that workers who put in more than 40 hours per week must be paid at a time and a half rate for the excess hours, but also that it doesn’t apply to managerial employees. Obama wants to have the Labor Department change the rules so that many workers who companies now deem to be managers will instead qualify for overtime pay.
Adhering to the line that ordinary workers must depend upon the federal government to save them from the unfairness of their employers, Cecilia Munoz, director of the White House Domestic Policy Council stated, “We need to fix the system so folks working hard are getting compensated fairly.”
This initiative might be good for some campaign ads touting the professed “compassion” of the Democrats, but, just as is the case with the minimum wage, there are hidden costs and trade-offs that make the effort useless if not harmful.
Suppose that the Labor Department revises its rules as Obama wants. Does it not occur to the president that employers will then make adjustments to avoid rising payroll costs? He may disdain business owners (the point of his revealing “They didn’t build that” comment) but neither he, his authoritarian Labor Secretary Thomas Perez nor anyone else can doubt that firms will compensate in various ways. The idea that this overtime change will suddenly transfer billions from corporate profits into the deserving hands of workers is silly – but the thought might keep some voters from abandoning the Democrats.
In its reporting on this, the New York Times dutifully parroted the trope that corporations are raking in vast profits while underpaying workers. That is more political misdirection. While some companies are indeed making strong profits, many others continue to struggle in the poisonous business climate the Obama administration has created.
Business isn’t a monolith and the cost of dealing with new and changing government regulations tends to hit small businesses hardest. To whatever slight extent the overtime pay rules have any bite, they will probably do so at small firms struggling to stay afloat.