Business Review Board / May 18, 2016

Final Overtime Rule Is Shortsighted

Bigger paychecks sounds great, but what about the repercussions?

The announcement regarding an amendment to the nation’s overtime rule was initially revealed about a year ago. In an op-ed last June, Barack Obama wrote, “[M]y plan [is] to extend overtime protections to nearly 5 million workers in 2016, covering all salaried workers making up to about $50,400 next year.” That plan was finalized yesterday by the Department of Labor with only slightly revised numbers.

The Wall Street Journal reports: “The rule will increase the annual salary threshold that generally determines who qualifies for overtime pay when they log more than 40 hours a week. … The threshold will be doubled to $47,476 a year from $23,660, a level last updated in 2004, administration officials said Tuesday. That means workers who earn annual salaries of less than $47,476 will be eligible for overtime pay, while eligibility for those with salaries of that much or more will depend on their job duties.”

The government expects the rule to benefit about 4.2 million employees, but, as with most regulations, the side effects will affect untold millions more. As National Review’s Carrie Lukas writes, “Employers will have to come up with the extra billions to pay more overtime due to the new rules. That means that while some workers may earn more under the new rule, others will lose out as businesses respond by reducing base compensation, cutting back hours overall, consolidating jobs, and raising prices.”

Moreover, Lukas adds, employers “face significant new compliance costs as they have to track more workers’ hours in order to assess when they qualify for overtime. The National Retail Federation estimates the new rule will cost employers more than $9 billion per year.” Not to mention the strain it puts on work flexibility — a perk that’s particularly important among women. Bigger paychecks are great, but only when the policies driving them don’t conflict with how a healthy economy revolves.

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