With A Stroke Of The Pen…

Yesterday Investor’s Business Daily posted an article about President Obama’s new Executive Order to change the rules for American workers regarding overtime pay.

The article reports:

Currently, businesses that pay salaried workers less than $455 a week have to pay overtime as well. Obama complains that this threshold has been raised only once since 1975. (He conveniently leaves out the fact that the last increase came during President Bush’sjobless recovery.”)

As a result, he says, too many companies are “skirting basic overtime laws, calling somebody a manager when they’re stocking groceries and getting paid $30,000 a year.”

Obama plans to raise the threshold to $50,400, which he says will make 5 million more workers eligible for time-and-a-half pay.

So let’s take a look at this. If you are working hard, it’s always nice to get a pay raise, particularly if you are putting in a lot of overtime. However, it seems to me that the decision to pay you overtime should be made by the company you work for (since they are going to be required to come up with the money to pay you). If you understand that companies are in business to make a profit (otherwise there is no point in being in business), then you understand that this Executive Order is not going to have the result that President Obama seems to think it will have. The head of a company is now placed in a position where he has to figure out if it is cheaper to pay someone overtime or hire someone part time. He also has to consider if he wants to replace one person who was previously not paid overtime with two part-time people paid less. At any rate, the unintended consequences of this Executive Order are going to hurt workers more than they are going to help them.