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New Obama overtime rules yet another U.S. job killer

Written By | May 20, 2016

WASHINGTON, May 19, 2016 — The Obama/Clinton urge to cure the perceived problem of income inequality seems more important to them than the need for economic growth. President Obama just changed the rules for paying employees in management positions, raising the exempt overtime pay limit from about $22,000 per year to almost $48,000 per year. This will end up helping a few and hurting many.

For small businesses, particularly in the retail, agriculture and hospitality industries, this change will be particularly devastating. In these industries, workers are typically promoted to assistant manager positions with the hope of learning the particulars of the businessand the management skills needed to assume a full manager’s role. Upon promotion to assistant manager, they have their pay schedule changed from hourly to salary.

Why Big Business loves minimum wage increases

Along with the increased responsibility, the workers may be excused from some work time for various reasons like doctor appointments, family obligation or sickness, without suffering any loss of pay. The disadvantage is that they often work more than 40 hours per week but receive no additional compensation.

Still, workers understand that the assistant manager position is a “learning experience” as well as a job. Psychologically, the employees feel part of the management team instead of feeling they are just another worker.

While the new rules will increase the compensation of assistant managers who are able to maintain their positions, small business simply cannot afford to increase their pay without taking some offsetting action. In addition, small businesses will be forced to change their hiring models so that assistant managers will likely become hourly workers instead of salaried employees. Or they simply will hire fewer workers at that level.

The net result of Obama’s action will be something that appears to help a few, while simultaneously reducing opportunity for many.

This action is similar to other actions taken by Obama and supported by Hillary Clinton. Raising the minimum wage is supported by most Democrats. That too will help a few while hurting many, especially if they double the minimum wage to $15 per hour. That will help those who have and intend to keep a job, but it will also eliminate jobs for many Americans.

Those actions, along with the passage of the Affordable Care Act, which now requires all small businesses with more than 50 employees to provide health insurance to all employees or pay a fine of $3,000 per employee per year, will raise costs for small businesses when they hire additional workers.

Making workers more expensive will reduce the number of workers hired. In the long term, it will encourage businesses to replace labor with capital. For instance, customers and chain restaurants will place orders by touchscreen rather than giving them to a server.

$15 minimum wage: Good politics, bad economics

The U.S. economy has not seen an annual growth rate of above 3 percent in more than 10 years. Economic growth would provide opportunity for every prepared worker. Growth would also reduce unemployment, raise wages, reduce government spending on income maintenance programs, increase tax revenue and improve the standard of living without having the government mandate policies which help the few while harming the many.

Once again, the Obama/Clinton agenda focuses on the lowest 10 to 15 percent of the income earners while harming the vast majority of Americans. The ACA helped about 15 million Americans (about 5 percent of the population) while increasing the cost and reducing medical choices for the majority. Raising the minimum wage helps a few percent of the population while causing the majority to pay higher prices and use tax dollars for income maintenance programs.

This latest policy will increase the pay for a small percentage of managers while reducing opportunity, slowing economic growth and causing higher prices for the majority. These policies are not only counter-productive, they are inconsistent with the way our system is supposed to operate.

It is time to change that and start focusing policy on the silent majority.

Michael Busler

Michael Busler, Ph.D. is a public policy analyst and a Professor of Finance at Stockton University where he teaches undergraduate and graduate courses in Finance and Economics. He has written Op-ed columns in major newspapers for more than 35 years.