Brad DeLong's Semi-Daily Journal: A Weblog

So, if nobody knows what the effect of these changes will be, why did they do them? They were bored?

*Somebody* obviously has some expectations that the rules will help them. Knowing the Bush administration, I'll lay odds it ain't labor unions.

"It is] amaz[ing] that the DOL doesn't collect systematic information on this as part of its obligations under the FLSA [Fair Labor Standards Act].... [People should urge] them to start doing so.... "

You can bet the DOL under Robert Reich would have...

If Reich had, that would still constitute sufficiently recent data for a resonable estimate, so I'm assuming he didn't.

This still begs the question of why there needs to be some sort of tradeoff here: why should one group have to lose its right to overtime pay, in order that another group gain access to it? Why shouldn't it be both/and, rather than either/or?

And why isn't the Democratic Party saying just that, and saying it loudly? If they aren't gonna fight for something like this, what exactly are they going to be passionate about?

Common sense says that Bush would not support, and labor would not oppose, anything that would not harm labor at the expense of the wealthy. The groups that have been actively supporting or opposing the changes must at least think that they know who will be harmed and who will be helped, or they wouldn't know what side to take. I would tend to trust their judgement more than that of some anonymous person from the Bush administration.

The change in rules has mean hundreds of pages of new rules for businesses to comply with. Press reports indicate that lots of businesses, especially smaller ones, had no clue who should and who shouldn't earn overtime pay, right up to the deadline. The change in rules itself imposed a cost on businesses. The change in pay will obviously impose a cost on those families whose budgets no longer fit inside their paychecks. So yes, it is very odd to say that these changes were implemented without anybody knowing how many workers would be affected.

One possible explanation comes to mind that makes the claim of the author true - official data don't allow an accurate assessment - while providing a pretty certain outcome, nonetheless. Firms knew what rules would be to their advantage. Firms did not need official data to help them make that determination. An effort to cut way back on overtime pay could well be the motive for the changes, even though claims that official data don't support "screw the worker" suspicions would also be true. Do we doubt that private firms understand what is in their interest?

Interestingly, this like that FactCheck line that Luskin parrotted. FactCheck says Kerry is lying when he argues that the new jobs pay $9000 less than the old jobs, which is rightfully criticized since the data is not that clear. But when Bush-Cheney claims the new jobs pay more - FactCheck does not attack them for saying something we are not sure about. Ah, the double standards continue.

How about talking about the real reason that the BLS does not have the data to make a proper assessment of the rule change.

The reason they do not have the data is 25 years of massive budget cuts. It is a wonder they are
still able to do what they do after the way the data collection agencies have had their budgets slashed over the last 25 years.

Along the same lines if you have had to cool your heels while sitting on a runay in Chicago
because of crowed airports you can think of the
time wasted as the tax you are paying for the Republican cuts to the FAA budgets.

It can't be "both/and" because then it wouldn't be politically viable. The rules change gets reported as some win, some lose, and then the media throws up their hands and says no one knows the net result. If workers only *lost* overtime pay, the reporting would be straightford and the rules change would be political suicide.

Let's hope everyone who loses overtime pay votes for Kerry and everyone who gains it votes for Bush.

And going forward this won't be rocket science. Enough workers are involved that a small survey will give good data. People have a good idea whether their paychecks shrink or grow.

http://www.epinet.org/static/briefingpapers_bp152.htm

In all, 1.4 million low-level, salaried supervisors will lose their overtime rights, along with 548,000 hourly supervisors, who could be switched to being paid on a salary basis and thus denied overtime protection.

More than 900,000 employees without a graduate degree or even a college degree will be designated “professional employees” and lose the right to overtime pay, even if their pay and status fall far below that of degreed employees. As many as 2.3 million team leaders with no supervisory authority will be exempted as “administrative employees” even if they are line or production employees.

Approximately 130,000 chefs and sous chefs who are not executive chefs will be exempted as “learned professionals” and “creative professionals.” Pre-kindergarten and nursery school teachers, no matter how low their pay, will be exempt under the new rule, even if their work does not require the exercise of discretion and judgment. We estimate that 30,000 nursery school teachers will lose the right to overtime pay.

Mortgage loan officers will be affected by the new financial services industry exemption and by the gutting of the protections for employees who are line workers, rather than policy or business operations staff. Ultimately, 160,000 mortgage loan officers will lose the right to overtime pay that they currently have today.

In addition, nearly 90,000 computer employees, funeral directors, and licensed embalmers will become exempt professionals and lose their right to overtime pay.

Furthermore, the DOL creates a new exemption that will deny overtime protection to otherwise nonexempt employees who earn $100,000 or more a year, as long as they regularly perform a single task that could be considered characteristic of an executive, administrative, or professional employee. This new provision will exempt an estimated 400,000 employees who currently are entitled to overtime pay.

http://www.epinet.org/static/briefingpapers_bp152.htm

The new regulations would raise the salary level under which all employees are protected to $455 per week (i.e., any employee making under $455 would be eligible for overtime benefits). Under current law that level is set at $155 ($170 for professionals), a pay rate that has remained unchanged since 1975. A salary of $455 per week equals an annual salary of just $23,660, about $5,000 a year above the poverty level for a family of four. And because the exemption level is not indexed for inflation, it will protect fewer and fewer workers over time. Initially, about 400,000 employees who work overtime will now be paid for it.

Though implementation won't be immediate at all firms, despite the deadline (not all firms understand what to do), one simply proxy for the impact on workers' pay will be hourly earnings data from the monthly payroll report. I haven't given any thought to the extent of the impact on monthly numbers, but certainly, we should be able to detect a change in trend over the course of a quarter or two. That is too late for the coming election, of course, but what we are able to discover from the data isn't all that important politically, anyhow. Workers will know what happens to their paychecks.

Come to think of it, the timing of implementation may be evidence that the trade off isn't all that stark. Maybe?

"It can't be "both/and" because then it wouldn't be politically viable. The rules change gets reported as some win, some lose, and then the media throws up their hands and says no one knows the net result. If workers only *lost* overtime pay, the reporting would be straightford and the rules change would be political suicide."

::scratches head::

Try that again?

It would be politically viable for Democrats (which was who I was really talking about) to stand up for the principle that it should be both/and, since they would be acting as advocates for pretty much their entire constituency.

However, if Bush were to totally step out of character and demand rules giving OT pay to everyone under $23K/year who doesn't have it already, what army would stand against him? If he were to do that, and back even a small increase in the minimum wage, (a) he'd get both, and (b) Kerry could kiss this election goodbye.

But Bush is so locked into being business' tool that there's no way he could step that far out of character.

The guess is that changes will be gradual, for denying overtime pay for employees who have been getting the pay may not happen at a stroke. Those who now have a right to ovetime will quickly be included. But there is reason to believe that in time there will be a limiting effect from the new rules.

http://www.epinet.org/static/briefingpapers_bp152.htm

Changes in the primary duty test and the redefinition of “executive” will allow employers to deny overtime pay to workers who do very little supervision and a great deal of manual or routine work, including employees in factories and industrial plants. Employees who can only recommend—but not carry out—the “change of status” of the two employees that they “supervise” will be exempted as “executives” even if they manage nothing more substantial than a team or grouping of employees.

Wouldn't the easiest way to analyze the question be to compare states with stricted overtime rules than the federal government to those which merely comply? (Which is not to say easy, just easiest).

Bush only knows that his corporate sponsors would mail him a check if he wrote the legislation the way they preferred. Why should he care what the workers think?

Won't the job market determine the effects of this rules change to some extent? If the economy is roaring and the job market is great, then employers may need to be more generous than they're required to be by law in order to land or hold onto desirable employees. Conversely, if unemployment has crept up and jobs are scarce, employers will apply the letter of these new rules without as much fear of negative consequences (employees quitting, missing out on higher-quality prospective employees). In other words, the strength of the job market will dictate to varying degrees the behavior of employers as it relates to these rules. Or is that naive?

This isn't necessarily relevant to the debate over the ability to statistically predict the impact of the new rules, but from a practical sense: Won't the courts be the ultimate arbiters of how many people are affected by the change?

My understanding is that there's a lot of case-law surrounding the old rules, and I have to imagine that the new rules will generate their fare share as well. Is there any reason that shouldn't be the case?

Meanwhile, a lot of companies on the front lines are stumbling around: I know of one case where dozens of employees were reclassified as eligible for overtime on Monday, but very, very few of these workers -- if any -- make less than $24K.

It would appear that the redesignations were made in error. They were also made in haste -- the workers' managers were only informed of the changes on Friday, and no policies have yet been drafted on how overtime will be applied to these workers when on business trips, etc.

Perhaps the company is just being conservative -- throwing a wide net so they will never have to pay back overtime until they can sort through all of the implications. But my guess is that honest errors are being made at both extremes -- it's going to take a long time, and probably a good number of court cases, for this to be sorted out.

As the law includes clauses increasing the bar for overtime eligibility by broadening the definition of supervisory status, it is pretty clear that reduction of eligibility, and making the "empowerment" of employees by pushing down supervisory duties less expensive, are two design goals.

Two of the consequences this will have that I can immediately think of are:

(1) A number of "senior position" people (foremen, team leads, etc.) will be stiffed of overtime pay. This is pretty obvious.

(2) In those professions where said people are (presumably by the nature of the work) empowered to make decisions how much effort to spend on something, what projects to consider, or what small problems they find during the day to fix, the now unpaid overtime will sway their judgement, and many things will not be done, as the incentive to make a few more bucks is gone, and who wants to cut into their precious leisure? That holds for themselves and for their inferiors. When unpaid extra work is assigned, people will start complaining, suddenly find problems and unsurmountable difficulties everywhere, have less inclination to work around obstacles, etc., and morale & engagement will generally decline. Then you get back to a situation where you need more whip-swingers.

What do you think?

CM -

That all sounds reasonable to me. I'd add that, depending on the job market, folks may look for other work that either pays more or pays overtime (or both) and simply leave that situation. But in that job environment, I doubt employers would feel as if they're in a position to deny OT even if they're not legally obligated to provide it.

Which really points out the bigger issue. The original OT work rules were instituted to some degree as measures to protect employees during poor economic times. So the above doesn't really apply.

Let's not ignore the effect this change will have on the economy. During an ordinary expansion, increased work means increased pay. More pay means more money to spend. More money to spend means more work.

While the economy is soft, employers can increase hours without increasing pay by simply requiring the employees to bank the hours for the duration. If they are clever they can probably do this indefinitely. As the President has pointed out, the rich have lawyers, working people do not.

This removes a feedback loop from the circuit. Workers will neither get more money or more leisure time. The recovery will not be sustainable.

Kaleberg: I agree, but another note on feedback: As I have expressed numerous times before, to the extent that workers are (in the aggregate) stiffed, work ethics and incentives will decline. This is how the Eastern Bloc disintegrated -- the translation of efforts into living standard was so ineffective (by misguided design) that people (not just workers) lost all incentives to contribute voluntarily. No economy can be sustained on such a basis. Workers in most jobs are quite empowered to substantially interpret their job description, which is often underappreciated by others. You can force them to work longer, but not to do quality work or take initiative.