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<font face="Verdana" size="1" color="#002864">http://www.mises.org/fullstory.asp?control=1500</font>
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<font size="2"><font face="Verdana" color="#002864" size="5"><strong>Working Overtime to Ruin Lives</strong></font>
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<p class="MsoBodyText" align="left"><font face="Verdana" size="4">by
Christopher Westley</font>
<p class="MsoBodyText"><font face="Verdana">[<span class="015492013-26042004">Posted
</span>April 26, 2004]</font>
<p class="MsoBodyText"><font face="Verdana"><img alt src="http://www.mises.org/images3/timeclock.gif" align="right" border="0" NOSEND="1" width="198" height="230"></font>
<p class="MsoBodyText"><font face="Verdana">Perhaps the most disappointing
aspect of the Bush Administration is the great chasm between its rhetoric and
its actions. There is much difference between the faith in civic virtue
declared in George W. Bush's inaugural address and the attacks on civil
liberties found in the Patriot Act. Similarly, Candidate Bush's campaign
speeches on a humble foreign policy significantly contradict today's dangerous
extension of costly military empire.</font>
<p class="MsoBodyText"><font face="Verdana">What gives? How great can the
distance between rhetoric and policy become before people realize that the
assertions of the Left and the Right are meaningless when both are used to
serve the cause of Big Government?</font>
<p class="MsoBodyText"><font face="Verdana">I have asked myself these
questions frequently over the last three and a half years, especially
following pro-government Bush Administration policies on trade, immigration,
education, and the national debt. Most recently, I asked myself this question
after reading about the latest Labor Department proposals </font><font face="Verdana">regulating
overtime pay</font><font face="Verdana">.</font>
<p class="MsoBodyText"><font face="Verdana">Overtime pay concerns the area of
wages, and wages, as any free market economist worth his salt can tell you,
result from a contract entered into freely by the labor supplier (the worker)
and the labor demander (the business firm). The federal government has
long intervened into what otherwise would be private, voluntary labor
agreements, especially in the form of income taxes and wage floors.</font>
<p class="MsoBodyText"><font face="Verdana">Both interventions are bad enough.
They reduce gains from trade, penalize unskilled labor, introduce some level
of violence into peaceful transactions, arbitrarily criminalize much
productive activity by creating extra-legal markets, and legally transfer
wealth to the State's"parasites and partisans" (to borrow a phrase
from John Taylor of Caroline).</font>
<p class="MsoBodyText"><font face="Verdana">The Fair Labor Standards Act of
1938 has been centrally planning for all these years with exactly these
results. The old overtime regulations, however, are less irrelevant today
because they only apply to wages that in today's economy hardly anyone earns. What
the DOL is doing is much like increasing the minimum wage after the
market wages rise so much that the minimum is irrelevant to most of the
workforce. Thank heavens for one small blessing that comes from inflation, but
it is precisely this that the government wants to take away.</font>
<p class="MsoBodyText"><font face="Verdana">It seems that last year, the Bush
administration considered revising the antique results in a way that might
have granted more liberality to workers and their employers. But now that the
500-page revision is out, we discover that precisely the opposite is taking
place. More workers than ever will be covered by overtime rules, which
effectively means that more people are going to be denied choice concerning
their working hours and pay.</font>
<p class="MsoBodyText"><font face="Verdana">Aimed at what the Department of
Labor calls low-wage workers—which the fine print defines as workers
earning up to $100,000, essentially 95 percent of the workforce—the ruling
clarifies who can and cannot receive overtime, by essentially shifting
overtime pay eligibility down the wage scale. If Joe Sixpack cannot
voluntarily negotiate overtime pay for time worked beyond 40 hours, then the
Feds will guarantee it with its threat of force. And if you can voluntarily
negotiate overtime pay but the Feds believe you already earn enough money,
then too bad for you.</font>
<p class="MsoBodyText"><font face="Verdana">The computations can be
complicated but the principle is not. Let's say, for example, a worker earns
$10 per hour. Because he needs the money and has the time, while the
business can use the help, he sometimes puts in 50, 60, or 70 hours per
week. This is not at all uncommon for single workers, for example. Under
current rules, the employer could employ him beyond 40 hours at $10 per hour,
which presumably is his marginal value product. It's not exploitation; it's
called exchange. </font>
<p class="MsoBodyText">
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<table style="HEIGHT: 58px" borderColor="#000000" cellSpacing="2" cellPadding="2" width="222" align="right" border="2">
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<td><font face="Verdana" size="4">Want to work more hours? Say hello
again to moonlighting.</font></td>
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<font face="Verdana">Under the new rules, however, if the employee wants to
work more, he can only do so by charging $15 dollars per each additional
hour of work. What will be the result? The employer will probably purchase
fewer labor hours (in accordance with the law of demand). Who is made better
off? No one. Both the employee and employer are worse off. Some help the
federal government has given!</font>
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<p class="MsoBodyText"><font face="Verdana">The proposals are shockingly
brazen in their presumption of federal control over the private workplace. (Read
the official overview of the proposed changes </font><font face="Verdana">here</font><font face="Verdana">.)
They dictate the salary threshold below which workers would automatically
qualify for overtime (to $425 per week). They create new entitlements to be
paid by employers (although in the long run, workers assume the economic
burden). They guarantee overtime to specific, politically approved occupations:
namely those in the public sector where overtime merely results in mulcting
the taxpayer.</font>
<p class="MsoBodyText"><font face="Verdana">The economy suffers greatly when
such regulations are forcibly added to voluntary labor contracts. Firms that
hire low-wage workers who traditionally work more than 40 hours a week will be
forced to reduce their labor demand, leaving many workers either out of work
(and eligible for various forms of unemployment welfare) or forced to work in
other areas of the labor force. Say hello again to moonlighting.
Many firms operating in competitive markets with narrow profit margins will be
forced to shut down altogether. </font>
<p class="MsoBodyText"><font face="Verdana">On the other end of the wage scale,
the regulations will harm those firms that found it necessary to attract high
wage earners by offering overtime pay. People who used to work overtime
repeatedly—to their personal betterment—will be forced to stop. Employers
who were once generous about allowing workers to work extra hours will no
longer be able to. The full cost of such interventionism must include the
workers who are now denied opportunities, as well as hard cash, for their work.
Never mind the effect that the proposals may have in terms of short-term
political impact. The result will be devastating to millions.</font>
<p class="MsoBodyText"><font face="Verdana">And predictably, there are enough
exemptions and classifications to create the ambiguity required to make these
proposals a sort of make-work program for labor lawyers, whose services will
be in high demand if they are implemented. Meanwhile, big business trade
groups like these rules because they increase costs on potential
competitors who can't afford to pay the increased labor costs.</font>
<p class="MsoBodyText"><font face="Verdana">The overtime rules are the
latest slap in the face of those who thought this administration cared an iota
for the principles of market exchange, to say nothing of federalism or states'
rights. Certainly the costs of implementing them in the public sector will be
passed on to states and cities that are already in the midst of much fiscal
belt tightening in the aftermath of the Fed-induced recession. In a freer era,
sovereign states would laugh at such federal overreach, and then ignore it.</font>
<p class="MsoBodyText"><font face="Verdana">Of course, in such an era, public
officials would be impeached for implementing policies that deviated so
greatly from their rhetoric (and, of course, the Democrats say that the White
House is gutting labor regs!). It is long past time for those who take liberty
seriously to stop supporting officials simply because they perceive them as
being relatively less statist in action than the competition. At the very
least, we should point out the discrepancies between the rhetoric of public
officials and their actions once in office.</font>
<p class="MsoBodyText"><font face="Verdana">We have to start somewhere. On the
Department of Labor's web site, Labor Secretary Elaine L. Chao is quoted as
saying that"Getting people back to work is what this Department does.
Giving people hope in their future is our job." If she was sincere,
she would be spending her time dismantling the regulatory burden her dreadful
department has created over decades in between acts of public penance.</font>
<p class="MsoBodyText"><font face="Verdana">If she were sincere, she would do
it working overtime.</font>
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<p class="MsoBodyText"><span class="015492013-26042004"><font face="Verdana">________________________________</font></span>
<p class="MsoBodyText"><font face="Verdana">Christopher Westley, Ph.D.,
teaches economics at <ST1:PLACE>
<ST1:PLACENAME>
Jacksonville</ST1:PLACENAME>
<ST1:PLACETYPE>
State</ST1:PLACETYPE>
<ST1:PLACETYPE>
University</ST1:PLACETYPE>
</ST1:PLACE>
. See his Mises.org </font><font face="Verdana">Daily
Articles Archive</font><font face="Verdana">. Send him </font><font face="Verdana">MAIL</font><font face="Verdana">.
Comment on this article on the </font><font face="Verdana">blog</font><font face="Verdana">.
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