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House Votes On Bill To Change Overtime Pay Rules

2017-05-04 01:17 | Network |

 House Votes On Bill To Change Overtime Pay Rules
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In a bid to overturn the overtime rules implemented under the Obama administration, the House voted to pass a bill that would allow private sector employees "compensatory time-off" in lieu of overtime pay, the Washington Post reported. The report suggests that the bill passed in a 229-197 vote along party lines. The Obama administration updated the Fair Labor Standards Act (FLSA) and extended mandatory overtime pay to over 4.2 million American workers. These changes, finalized on May 18, 2016, raised the threshold at which salaried workers automatically qualify for overtime pay from $23,660 to $47,476 per year.

Under the changes proposed under this new bill, workers could voluntarily take time off or bank the time off for a later date instead of getting paid for overtime if their employer provided that option. However, the report points out, the employer will be forced to pay out all overtime dues within 30 days if the employee decides to change his or her mind and cash out instead.

The supporters of this bill hope that it will bring greater work flexibility to workers. According to the Washington Post, while making an argument for the bill she proposed, Representative Martha Roby (R-Ala.) said the the bill "provides flexibility for working moms and dads who need more time to spend taking care of their family responsibilities."

But the naysayers would not have any of it. Senator Elizabeth Warren who believes that it would hurt American workers, tore into the the GOP on Twitter.

.@HouseGOP Americans are fed up with a Washington that works great for giant companies but kicks hardworking people in the teeth.

— Elizabeth Warren (@SenWarren) May 2, 2017

How Business Reacted to the Overtime Rule

While Senator Warren has minced no words to say that the House vote has gone to the advantage of big businesses, the overtime rules as they were implemented were far from perfect. Business leaders pointed out the first and most obvious flaw in the FLSA changes made under the Obama administration. "The money has got to come from somewhere," said Ron Peppe, vice president of Canam Group Inc. That would give employers an incentive to reduce hours, lay off workers or raise prices. Employers could stop hiring salaried employees and hire hourly employees, who would get overtime pay but won't receive other expensive benefits. Flexible scheduling may disappear in favor of rigid clock-punching to prevent accidental overtime hours from accruing.

A study from Mercatus Center economists Donald Boudreaux and Liya Palagashvili found "there is neither theoretical nor empirical support that the proposed regulation will meet its stated objectives; in fact, evidence suggests that moonlighting may increase in response."

The National Federation of Independent Businesses (NFIB) said the new rule affects 44% of small businesses. The NFIB asserted that it makes sense to move managers to hourly jobs and indicated that time cards are necessary to prohibit workers from overtime hours. It also advised using loopholes in the new rules to exempt workers from the law.

Overtime Rule May Not Boost Economy

The Obama White House had anticipated backlash from economists and business leaders when it came up with the overtime pay rules. It chose an odd line of defense, however, when it suggested that higher labor costs would actually increase the demand for labor and boost economic growth.

"This extra income will not only mean a better life for American families impacted by overtime protections, but will boost our economy across the board as these families spend their hard-earned wages," read the White House press release.

It is an older argument and one frequently trumpeted by pro-minimum wage advocates. It purported that the government could boost aggregate demand by mandating higher salaries for employees. Extra cash could fuel more business revenue, triggering a cycle of growth and spending.

Although superficially compelling, the argument inverted economic logic. If economic growth could spring from higher wages and more spending, the government could ostensibly set the minimum wage at $100 or $1,000 per hour and create an enormous boom. Instead, such a move would trigger either extraordinary price increases or massive job losses.

Employers cannot afford to pay a worker more than the value of the product generated from the worker's labor. The only sustainable way to boost wages or generate lasting economic growth is to increase labor productivity. Price fixing can only lead to shortages, which means fewer hours and jobs available.

Regulations Disproportionately Harm Start-ups and the Young

Supporters of the change to overtime rules believe that as they stand the rules hurt start-ups and young employees the most. Larger and established companies are more capable of surviving the higher costs they bring. Established firms tend to have stronger cash flows and more loyal customers who might stomach minor price increases. They can afford to cut benefits or less productive employees without putting the business at risk. More insidiously, they can wait for costly regulations and wage requirements to drive out smaller competitors and pass all of the costs on to the consumer.

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