How the New Obama Overtime Rules Will Squelch Opportunity By making more workers eligible for overtime, the Obama Administration may be making the job market worse, not better.
By Ray Hennessey Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Showing your entrepreneurial zeal and seizing an opportunity to shine in an organization may get much harder.
In a move that is likely to raise compensation costs on small or medium-sized businesses, the Obama Administration is set to announce rule changes that would require overtime payments to a wider swath of workers.
Under the new proposed regulations, which took many business groups by surprise, salaried workers who have some lower-paying executive positions would be eligible for overtime. Right now, salaried workers are exempt from overtime if they earn more than $455 a week and are classified as executive, administrative or professional employees.
Backers say the higher thresshold would correct what they perceive as inequities in some management positions in fast food and retail. But the rules will likely affect a wider swath of smaller, independent businesses, which often deem key employees as executives, and therefore pay salaries rather than wages.
Related: CBO Says Raising Minimum Wage Will Lead to Job Cuts
There is a philosophical impact for which to be mindful. Forcing businesses to pay overtime might have a deleterious effect on key employees looking to shine, particularly the most entrepreneurial in an organization. Most business owners know the long hours it takes to manage a company. No one's tear ducts dry out over this, since most of the reward goes to the owner anyway.
But many ambitious employees -- let's call them future entrepreneurs, or occupreneurs or intrapreneurs, or whatever the latest lingo is -- have used the ability to put in long days as a selling point both internally and with other potential employers. The willingness to work longer hours makes them stand out, and often leads to higher compensation and more opportunities.
Under the proposed rules, business owners could be forced to prevent these employees from showing what they're made of. Workers will need to clock in and clock out for their set periods of time. An impulse to show initiative by putting in an extra hour or two will be rejected, since business owners won't want to run afoul of the law or pay the time-and-a-half necessary to comply.
Some may argue that it has been unfair that employees have worked more hours without additional compensation all along. But that is short-sighted. Look at most startups, which are characterized by long days and hard work. People work together on a common goal -- to build a company, get a product to market and earn revenue that can be shared with all members of the organization -- so everyone invests the time necessary for success. At many startups, an eight-hour day is a four-letter word.
Related: The Myth of the Have-Nots
Transfer that to some of the positions targeted by the Obama administration's latest rules. A person who is ambitious enough to want to be a manager at a fast-food restaurant likely doesn't balk at the extra time needed to excel at that job because the position is just that: a job. It is but a single step on a pathway to a more meaningful, lucrative career. These managers have been recognized already for their drive and skills, or else they would still be dunking fries in oil instead of overseeing the operation. Along the way, they learn additional skills and hone their own business values. Pay at this level is just a small component of what they get out of a job.
Eventually, these workers realize that skill and drive can be traded for better employment -- and pay and opportunities -- elsewhere. To some, that means a different career. For others, even in the fast-food business, that means owning a franchise themselves.
That experience, that recongnition of what opportunities are available to workers at all levels in a capitalist system, is lost when the focus solely is on wages. Pushes for higher minimum wages and tougher overtime rules miss the point that the jobs most affected are almost never permanent for the worker himself. They are a lower rung on a ladder, and policies should instead focus on the climb upward, not the experience on the ground floor.
In the end, if the new overtime rules take effect, there is a high likelihood that both business owners and workers will take a step back. Companies don't have to pay more overtime. They can just cut hours. While some are suggesting that companies will add positions to avoid having to pay current workers overtime, that makes little economic sense either. Even if they did, it would likely be low-paying and part-time positions. Businesses, at the same time, would face higher costs in a bad economic environment. Those costs would either cut into profits -- which will make owners think twice about hiring new full-time staff, which is the best way to solve our current employment crisis -- or be passed on to consumers.
Worst of all, along the way, the values that are born from labor for the sake of experience will be lost. It is a missed opportunity to prevent the most ambitious from seizing their own.
Related: 5 Reasons the Fast-Food Worker Protests Are Off Base
