When President Obama declared that anyone earning less than $47,500/year would be taken advantage of if not paid overtime, he made sure to exclude one class of Americans. I'll get to who is less deserving than the rest of us in a moment.
This is the second of two installments - here's the first:
We are in Carrboro, North Carolina - Not San Francisco. All Cities are not Equal
There is a Federal Minimum Wage - and beyond that, states and, in some cases, cities, adjust the Minimum Wage as needed. This is in part because cost of living varies so wildly in our country. Below, you can see that the new FLSA rule will require us to pay OT to people earning well above the average per capita salary in Carrboro, NC where our office is located.
- the average per capita salary in Carrboro, NC is $34k & Average HH income is $50k
- the average per capita salary in Manhattan is $63k & Average HH income is $72k
- the average per capita salary in San Francisco is $52k & Average HH Income is $77k
Some Employees are More Efficient Than Others - Should we Fire Less Efficient Employees Who Still Get Their Work Done?
Many of our white collar staff are paid for their ability to create art while others are paid for their ability to organize, synthesize and process information. In either scenario, what one person completes in 8 hours might take another person 10 hours. We don't fire people who take longer - we just do our best to evenly distribute the workload and let people set their own schedules. It's important to note that with one or two exceptions, only a very short list of senior management regularly works more than 45 hours in a week.
What if Someone Wants to Show Initiative?
Effective 12/1, if a 20-something rookie wants to show initiative, work hard, put in the hours and make a mark - stand out and be promoted - we can no longer permit that. The OT risk is too great. Our business, like many others, thrives on finding and promoting superstars. I imagine all that will change under the new ruling.
Young New Talent + Learning Curve + Fast Growing Company = $ Disaster
We regularly hire people out of school as well as folks early in their careers and not yet accustomed to a professional work environment like ours. These folks come in with spirit and thirst for knowledge. They often work extra hours for six months to a year as they absorb as much as they can, work inefficiently, and, overall, try to hit their stride. Consider that we tend to double our work force every two years - and our retention rate is strong. We're growing careers, teaching folks, giving them skills that will last a lifetime not to mention a chance at growing a career with us. In return, people work at entry level salaries and put in the extra time needed to find their way. The new FLSA requirement makes this model of training and nurturing young talent all but impossible.
The Only Americans Overlooked by This Rule Are...
It speaks mountains about our nation's unfortunate priorities that teachers are a class of Americans entirely exempt from this rule. There is, of course, rationale for this as there is for every injustice that's ever been forced upon a class of helpless people. There is simply no excuse - none - for excluding teachers. The only possible rationale is that the public (and many private) school systems would collapse if forced to follow the new FLSA OT rules. If The President and the FLSA truly believes that working more than 40 hours/week without OT pay if you're paid less than $47.5k/year is an economic injustice, then there should be only one class of American Citizen - teachers must be included.
Hill Staffers
Ditto for Hill Staffers whom I understand are also meant to be excluded. This means that members of Congress, The White House, the Judiciary, can pay staffers less than $47.5k/year and work their staff 60+ hours a week. Again, there is absolutely no excuse to create two tiers of citizens.
Capitalism Works
I am an avowed believer in capitalism. At the core of capitalism is the base concept that most human beings, given the chance, modify behavior to pursue wealth. So imagine it's a post 12/1 world and you're someone who is now eligible for OT. It's 6PM and the office is closing, but there are a few more emails you have in your inbox. There's the initiative/idea you've been meaning to work on but haven't had time to do. Or maybe you just spent a bit too much time dawdling and chatting with co-workers during the day and you're a bit behind. Do you shut down your computer and leave - or sit and work another 30-60 minutes when you know the work you're going to complete is valid and you'll get paid OT for the extra hour? What about catching up on work on a rainy Sunday? In effect, this new OT rule incentivizes people to stretch their workload beyond 40 hours regardless of actual need.
Isolating the Real Issue
FLSA defines a range of worker classes. It appears that the problem this new OT law is trying to address is specific to a class that exists in reality, but has yet to be defined by the FLSA. In short, the challenge is with salaried people whose job it is to oversee, manage and schedule hourly employees. From McDonalds to Walmart, Target and the rest - an hourly floor worker gets promoted to management, gets a raise and then is given 50-60 hours of work to complete each week with no additional compensation. The challenge for this manager is that he or she doesn't have a transferable skill set to look for another, better paying job.
Companies like ours train workers - and the more successful someone is, the more their salary increases. If we can't pay a competitive salary to a smart, valuable employee, that person has skills and can look elsewhere. In short, our staff have competitive job skills.
Suggested Correct Solution
FLSA should create a new class of workers - "Managers of Hourly Wage Earners"- these folks should be eligible for OT if paid less than $47.5k/year. That makes sense and addresses the problem at hand without punishing those of us trying to nurture and build actual careers that come with built-in salary escalators.
I have no illusions. The new FLSA law will likely stand. Businesses large and small will need to address the challenge in their own way. We won't fire anyone, but other companies will. We won't cut anyone's salaries - but other companies undoubtedly will. We will have find our own way to protect ourselves from insolvency. We have five months to figure out how to do this.