Would temporarily increasing overtime pay lower the unemployment rate

Great Debates
1

Oone thing I have noticed is that despite how many unemployed people there are who want to find a job, many people who have jobs are overworked. Not only are they being given more tasks per hour, but I know several people who are working 70 hour weeks who collect overtime pay on anything over 40.

I assume from a business perspective it is cheaper to offer overtime pay than it is to hire someone new and have to pay taxes and benefits on the new employee, ie one person working 70 hours a week with overtime pay is cheaper than 2 people working 35 hours a week.

Then again, when you do that people get burnt out and start looking for other jobs and I assume turnover goes up.

But what if federally mandated overtime pay was temporarily increased to 2.0 or 2.25 or so of regular wages instead of 1.5 and expanded to more fields? Would that do anything to lower unemployment? Combine that with business tax cuts for hiring and FICA taxes combined with hiring people as temps at first so you can avoid paying benefits, and it sounds like a feasable idea to lower the unemployment rate.

2

Temporary? Nope - I would keep with my current cost structure, knowing that the increase would go away eventually.

For the math to work, you have to overcome ALL of the costs:

Healthcare
Training time (how long are you worth less than a full employee)
Office / cube build out
Equipment
etc.

I often seen numbers of 1.5 - 1.75 for total cost of an employee (take salary times the factor). A few hours of paid overtime won’t overcome that, and often my employees WANT OT pay. They ask for opportunities to earn some.

As for turnover due to burnout, let me know when unemployment drops. Right now, the employer has the edge in this economy.

3

Here’s a modest proposal.

Outlaw private health & dental insurance. Declare eminent domain on the insurers & buy them all out. Change the present Medicare FICA with a flat surtax of ~10% on all income to cover all health & dental insurance in the country.

Suddenly, health insurance will be no longer a separate cost from wages & salaries, but instead a function of GDP.

After that, you may not even need to change the overtime multiplier. Wages & salaries will have a direct relationship to employer outlays.

It rationalizes the system.

4

The problem is companies HAVE money. They have lots of it. ABC News just did a piece on this. Companies have money but aren’t spending it.

First, they are afraid that if they spend the money and the economy doesn’t pick up it a gamble they’ll lose.

For example, let’s say by using overtime they can increase the output by 5%. They can’t increase it anymore because there are physical limits on workers. But if they spend money and hire people they can increase it by 15%.

Sounds pretty straightforward, but in these “iffy” economic times it’s better to take the 5% and be safe, then take the 15% and lose the ENTIRE business if the forecasts don’t pan out.

More importantly, employers have learned they can get away with it. They can pay depressed wages and use the economy to scare workers into more production.

Until the job market picks up, this will be the case.

For example I find when I go on job interviews, even for something like a front desk clerk in a hotel or accounting manager in a hotel, the jobs are for LESS money then I made in 1998.

And if you factor in the fact the minimum wage is twice now what it was back then, it tells even more.

Third, in this economy really was able to weed out the deadwood. I don’t mean people who didn’t work (though there were some in there) at their job, but jobs that weren’t needed. Until we get a robust hiring cycle, like we had in the late 90s, you won’t see those jobs come back.

Lastly, we now have employers able to use part time workers. Most jobs I go for that are low level, minimum wage, the employers are offering between 20 and 30 a week.

This is hiding a MUCH bigger problem than unemployment, which is underemployment.

This has hidden consequences such as unstability.

For example: Mr Road Runner works for ONE company and makes $10/hr and works 40 hours a week. That is $400/week

Mr Coyote working two jobs making $10.00 at each job and working a total of 40 hours a week . He is also making $400/week

But Mr Coyote is likely NOT to spend any more money than he has to, because having two job makes him feel unsecure. He knows if he loses one, he can’t fall back on the remaining one and even if he can get unemployment insurance, it will be very little and that is IF he gets it.

So economists will look at this and see two people working similar hours and same wages, but in reality you have two people, Mr Road Runner who sees his job as stable and will spend. When you spend you help the economy. Mr Coyote won’t spend so even though he’s making the same money, working the same hours, he isn’t helping any.

It’s small little things like these that simply aren’t being addressed, and until they are you’re creating problems. Of course economists and policitican (BOTH Republicans and Democrats) are too busy manipulating numbers to show they’re doing something.

5

If you increase the cost of employment, you will get either less employment or higher product costs, depending on what the state of the economy is. If people have lost of money and are not too worried about the future, you’ll probably get increased product costs. Do you think we’re in that type of situation?

6

Just out of curiosity, but where do you live that the minimum wage is TWICE what it was in 1998?

7

The situation I have seen is that there are people who are desperate for work and there are people being pushed 60-80 hours a week who collect overtime who want relief. So ideally there should be some policy to fix problems for both people.

As far as Algher’s statement about people wanting OT pay, yes they do. But that usually only lasts for a few weeks or months at the longest from what I have seen. People who do nothing but work 11-14 hours a day 6-7 days a week get tired of it quick even if they are making OT pay. There are people who enjoy working 12 hours a day nearly every day of the week and getting the money, but usually not for extended periods of time.

8

In IL the min wage is $8.25. In 1998 federal min wage was $5.15, but a few years before it was $4.25.

9

I’ve heard the same thing before. Another thing I’ve heard is that production and demand overseas is starting to compensate for the lack of demand & production domestically, so companies are focusing more on those markets.

I don’t know if that means growth overseas will eventually lead to growth here. But the idea of 500,000 new jobs a month to get out of this recession doesn’t sound realistic any time soon.

Not only that but there was no job growth to address population in the last 10 years. You need about 150k a month just to address population growth. In the US back in 2000 we had about 280 million people and about 132 million jobs. By 2010 we had about 310 million people and about 130 million jobs. Even w/o the 8 million jobs lost in the recession we are still about 15 million jobs short due to population alone. Add in the jobs lost due to cut hours (the equivalent of 3-4 million) and we are about 20-25 million jobs short of what the economy normally would have.

10

Why?

IMHO, this isn’t the sort of thing the government should concern itself with.

11

The government has succeeded at many many battles:

The war in Vietnam
The war on drugs
The war on cancer
The war on poverty
We are due for a war on unemployment. Nothing a little elbow grease and tax increases on people who make more money than me can’t fix.

12

:dubious:

I think you are going about that in exactly the wrong way–increasing regulation won’t encourage businesses to grow and innovate.

13

While I disagree with Rand Rover, this has GOT to be some kind of sick joke. Especially the former. :rolleyes:

14

What you are saying, makes no sense.

IF there really was a job shortage in the United States, then why do we need to bring in millions MORE ** legal** immigrants each and every year?

In addition to the millions of legal immigrants, we also have tens of millions of illegal immigrants, that supposedly, cant be deported because we dont have enough Americans or legal immigrants who could take their place.

As long as we continue to **need **to bring in millions more immigrants each and every year in order to fill all the open job vacancies in the United States, then the whole “unemployment” discussion is just a charade and a fraud.

People should just start using some common sense - we would not need to immigrate millions of foreigners if we really had an unemployment problem.

15

I think Guinastasia and** Rand Rover **just got whooshed by Wesley Clark.

Given the past couple of threads, I think people believe that there is some fixed amount of “work” and that by messing around with people’s shifts, companies will need to hire other people to pick up the slack. I think they tried that in France where they have a mandatory 35 hour work week and a permenant 9% unemployment rate.

All this is governed by the law of diminishing returns. IOW, two people working a total of 80 hours don’t necessarily produce 2x as much work for 2x the cost as 2 people working 40 hours each. The nature of the work may necessitate that it can’t be split among additional workers (ie nine women can’t make a baby in one month). Or when you add in the cost of hiring, onboarding and training a new employee, the costs are much higher. Or the companies don’t know if the current workload will last.

16

The cost of labor includes wages AND benefits.

It is cheaper to hire 1 employee to work 80 hours, than it is to pay benefits to 2 employees working 40 hours each.

A company can maximize its profits by using a mix of overtime and part time employees - …or, by outsourcing the work to asia. …which is what is being done.

This, along with “free” trade, and immigration, are intentional and deliberate economic policies in America that the voters want.

Bottom line: there is no unemployment problem.

17

There are also laws of increasing returns, as you somewhat obliquely address above.

The “Lump of Labor” fallacy, which underpins the French philosophy of the 35-hour workweek, also assumes that “Work” is a simple, interchangeable basket of tasks that can be performed by interchangeable humans.

It’s curious that most of the socialist thinking behind the Lump-of-Labor fallacy pays lip service to Valuing the Worker…when in fact the supporters of such things are actually devaluing the worker, by suggesting that an individual adds no special skills to his/her job above and beyond what the next person standing in line could provide.

Increasing returns come from highly productive workers, innovators and investors working more. If Worker A is 2x as productive as Worker B, society will get 3x man-weeks of productive output if Worker A and Worker B both work 40 hour weeks. Society will get 4x man-weeks of productive output if Worker A works an 80 hour week.

18

I’ll make it a point to inform the people I know who are out of work and cannot find any of this. Any suggestions as to how to make them believe it?

19

Yeah, have them go to any immigration office to see the long lines of foreigners coming in this country to work here. If we had enough workers, we would not need to bring in 50,000 additional more foreign immigrants each, and every week, week after week, month after month, year after year…and yet we still are short tens of millions of workers.

Also, take a look at all the companies who are forced to hire H1-B visa foreigners, or who have to outsource foreign labor to get enough workers.

Check with the farmers all across the land who need to hire foreign workers to pick their fruit and vegetables in order to bring in their harvests.

Only a country that has too many unfilled job openings needs to resort to record immigration in order to bringing in millions of foreign workers to get their jobs filled.