Much like increases in the minimum wage, government mandated artificial price-floors effectively outlaw entry level jobs and, in this case, overtime. When a market won't support the pricing bureaucrats fancy, employers reduce hours, automate, sell less, or simply close their doors. This is from
Allen Smith writing at SHRM, summarizing a study from
Oxford Economics regarding the government's attempts to increase pay via overtime laws:
A big concern HR professionals have with the upcoming proposed overtime rule is how their employers will afford overtime for so many additional people, assuming that the salary threshold for exempt positions is raised and many more employees become eligible for overtime.
But research has found that realistically, no matter how much the salary threshold is increased, employers will adapt and use various strategies to keep employees’ overall pay relatively the same, according to a May 19, 2015, National Retail Federation and Oxford Economics study.
Raising the wage threshold from $455 to $984 per week, or to more than $51,000 per year, would mandate overtime pay for an additional 2.2 million workers in the retail and restaurant industries alone. “Assuming, unrealistically, that employers do nothing to alter workers’ hours, benefits or hourly rate of pay to compensate for their increased costs, this would cost restaurant and retail employers $9.5 billion per year,” the report stated.
However, businesses likely would adjust compensation schemes to ensure they do not absorb additional labor costs by:
- Lowering hourly rates of pay to leave total pay amounts largely unchanged.
- Cutting bonuses and benefits to increase base salaries above the new threshold.
- Reducing some workers’ hours to fewer than 40 per week to avoid paying overtime, cutting compensation proportionally.
Employers likely would counteract those lost hours by hiring new, lower-wage and largely part-time hourly workers, the study predicted.
In jobs with back-office activities, employers would turn to automation to increase efficiency. And workers in lower-level professional and managerial jobs would find their status jeopardized, the study added.
“The net results of these changes would be an accelerated ‘hollowing out’ of low-level professional and administrative functions, as firms centralize their management structures to rely on a smaller number of genuine managers and professionals,” the report stated. “Workplaces would become more hierarchical and inequality would increase. Lower-level employees, currently covered by overtime law, would find it harder to rise into the professional ranks as the number of midlevel salaried positions contract. Companies would encounter difficulties developing talent and promoting internally because of a narrower pipeline of talent.” ...
