Thursday, July 02, 2015

President Obama proposes free raises for everyone

The Obama administration's latest bright idea is to nearly double the threshold for which salaried workers are eligible for overtime pay. The new rule would raise the threshold for time-and-a-half to $50,440 a year from $23,660.

"We've got to keep making sure hard work is rewarded. Right now, too many Americans are working long days for less pay than they deserve. That's partly because we've failed to update overtime regulations for years -- and an exemption meant for highly paid, white collar employees now leaves out workers making as little as $23,660 a year -- no matter how many hours they work.

"This week, I'll head to Wisconsin to discuss my plan to extend overtime protections to nearly 5 million workers in 2016, covering all salaried workers making up to about $50,400 next year. That's good for workers who want fair pay, and it's good for business owners who are already paying their employees what they deserve -- since those who are doing right by their employees are undercut by competitors who aren't.

"That's how America should do business. In this country, a hard day's work deserves a fair day's pay. That's at the heart of what it means to be middle class in America," President Obama wrote in an op-ed for The Huffington Post. 

Let's imagine for a moment that we live in fantasy la-la Obama land and people don't get laid off or hours cut when he forces increased wages and rates. With the increase glut in the money supply, inflation would rise and that new wage rate would be worth the same amount as before. However, in real life, people will be fired, entrepreneurship will be stifled, and prices for basic commodities will increase as costs do.

This type of stupidity highlights Democrat ignorance about economics. The simple truth is this: every time government enacts a rule, market participants immediately begin innovating around it.

The assumption of the rule-makers is that companies and citizens will placidly do what policy-makers want them to do. That might work if people were sheep, but they're not.

Here are some of the predictable outcomes of this rule: workers will be reclassified as salaried; hours will drop to avoid overtime; two part-time workers will be hired to replace one full-time worker; automation will replace people.

Yes, of course this is an idiotic ruling, which flies in the face of logic, and is another blatant display of the farcical nature of Obama's economic wherewithal.

But does he care?  Do the Democrats care? Do the mainstream media care? Of course they don't!  Obama doesn't make these kind of moves based on whether they're good or bad for the economy.  He doesn't make economic decisions after considering long-term consequences. Why should he?

For Obama it's all politics, and nothing but politics, all the time.  As far as he's concerned, that's what he's there for.

There will be very few employees who will see additional take home pay after this change. That's really not the intention. The term "exempt" means exempt from age and hour rules and it also means exempt from collective bargaining rights.

A large proportion of salaried exempt managers are in the fast food and other relatively low paid hospitality and retail businesses.  (An hourly worker being paid $12 per hour is happy to be promoted to a manager position paying $30,000-$40,000.  It means a guaranteed monthly income, even when overtime is not available.

An employer is not going to give a $35,000 employee a $15,000 pay raise, he's going to put the employee back on the clock.  But when he makes that employee non-exempt, that employee can join a union already in place and becomes a target for unionization.  Obama knows this is not going to raise anyone's pay, but it is going to increase the number of employees who can potentially be organized, even though they are management.

At the end of the day, no business is going to pay you more than the value of what you are adding. If someone is new to the labor market, has no skills and no education then it is very hard for a business to justify a position for them with the ever increasing labor wage requirements set forth by Federal, state and local governments.

Raising government mandated employment costs only increases the economic output per employee required to justify it, In other words, you are increasing the minimum skill and education required to enter the workforce. It is therefore no surprise that those without these skills and education are increasingly left out of the workforce.

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