Thursday, May 19, 2016

May 19, 2016

The Worst New Thing in the World Today
The Obama Administration has announced new rules that would require overtime to be paid to any worker, subject to certain exemptions, who makes more than $47,476 a year. Naturally, the move is being hailed by many as a big move in favor of the little guy and the middle class, but the reality is likely to be somewhat different. We'll elaborate on this theme in an upcoming piece, but the short synopsis runs something like this.

So the bill appears intended to affect many white-collar workers as well as blue-collar ones. If you're currently making less than $47k a year, now you can no longer be just salaried. And in order to comply with the regulation, many more workers will need to track their time in order to calculate the overtime. As a result, if a business has an employee who makes $46k and works late at all, it appears it would be cost-effective to just boost their salary above the exemption threshold. No doubt, this will happen in at least some cases so businesses can avoid the hassle of tracking and the possible compliance issues associated with it.

But then we realize what this rule has effectively done. Like the minimum wage, it effectively raised the cost (both wages and compliance) associated with all employees in between the previous threshold ($23,660) and the new threshold ($47,476). And when you raise the price of something, you tend to get less of it. While it's very likely that some individuals (and certainly, the makers of HR software solutions) will benefit from this law, there's no reason to think that will be true in aggregate. Moreover, the law is apparently going to be applied uniformly across the states regardless of cost of living or median income--so San Francisco, CA and Fort Dodge, IA will have the same arbitrary salary threshold. Whatever one thinks of such a rule in general, this kind of one-size-fits-all is clearly indefensible because its impact will produce completely different results in high-income areas versus low-income ones.

Additionally, it's worth considering how this changes the dynamic for people affected by the rule. Imagine an employee has a major deadline approaching and feels the need to work extra hours to ensure it gets done on time. Before they were subject to overtime requirements, the choice was clear. They would work a little extra to avoid the stress of looming stress of a close deadline, and hopefully, the boss will note and appreciate the extra work they put in when comes time for reviews. Once overtime rules are in effect, the employee now has three less attractive options. Work overtime and report it--they'd get more money, but it also could create tension with the boss, and they might have to defend why they've been delayed. That's not a good experience to repeat regularly for long-term success. They could work more and lie about how much they worked, having a wink-wink understanding with their boss. This would basically put them back in the same position as before, but now they have to lie to do so. And the business is potentially subject to legal liability if the arrangement is discovered by someone who cares. Or last, they can just go home and risk missing the deadline--if and when they do, no doubt it will not be beneficial to their career. Once you consider this scenario, it's easy to see how this could actually make the employees worse off in the long-run in spite of its intent. Having personally had jobs that would now qualify for overtime "protection", I have no doubt that it would have made my work environment more stressful, and certainly would have had deleterious effects on my career. Why wouldn't the same be true for others?

More Bad News
A passenger plane from Paris to Cairo went missing off the radar, and the wreckage was found near a Greek island. Given the plane's destination in Egypt, the situation naturally draws some parallels to the Russian passenger plane that was destroyed last year due to a bomb that was planted on the plane. The ISIS affiliate in Sinai had credibly claimed responsibility in that case. The only plus side here, if any, is that early reports suggest the plane went down in the Mediterranean Sea and not over land--this would diminish the likelihood of terrorist factions shooting down the plane with any of the high-tech weaponry they likely have access to. Additionally, since the plane is coming from Paris, it would appear much less likely that Paris's airport security was infiltrated to allow for a repeat of the earlier attack. However, speculation of terrorism as the cause is widespread. If it is determined that Paris's airport security was penetrated, enabling this attack, we can expect another aggressive foreign policy reaction from Western nations. For now, we should hope this was simply a tragic accident.

The Silver Lining
Obama gave a reasonably good speech recently on the topic of free speech and political correctness. In practice, of course, his Administration's record on the subject isn't great, including very aggressive campaigns against whistleblowers. But still, it's a win when someone generally in the left-leaning camp praises free speech to college students. When it's a popular political figure like Obama (at least among such circles), there's at least a chance it could have a positive impact. Credit where it's due.

You're off the hook for an additional reading recommendation today. This was already on the long side as it is...

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