Age, time and overtime: the US cult of overwork

In the past decades American full-time workers have been working longer hours, and this trend is predicated on a number of factors that may be reaching their expiry date. (For this discussion I leave aside the issues of part-time, temp, and freelance workers.)

Historically, hourly workers are compensated with overtime pay of 1.5 times their regular hourly pay for all work past 40 hours. However, the Fair Labor Standards Act of 1938 assigns a threshold for pay, above which no overtime is paid. This is intended to segregate higher-paid employees, the so-called non-eligible — managers, executives, and professionals — from receiving overtime pay. This is an ongoing division between white collar and blue (and pink) collar workers: the class divide embedded in the law of the land.

As Ross Eisenbrey points out, there are practical problems with the implementation of the Act:

As with the minimum wage, which is not automatically adjusted for inflation and tends to lose real value unless it is raised, the overtime exemption threshold generally languishes. That means that many people who once would have been paid 1.5 times their wage when working overtime are not, violating the spirit of the law.

For decades, the Department of Labor periodically updated the overtime salary threshold. But today’s threshold, at $455 a week, is far below historical levels in real terms. And at just $2 a week more than a poverty-level income for a family of four, it is indefensibly low. I propose that President Obama raise the threshold to $970, equal in today’s dollars to the 1975 level of $250.

Eisenbrey points out that this artificially low threshold makes it advantageous for employers to get hourly workers whose weekly pay is above the threshold to work overtime, instead of hiring more workers. But this is contrary to the spirit of the law, which was devised to get people back to work in the thirties.

That’s the most minimal tweak, to just getting the Act to accomplish what it was intended to do in 1938. I  am in favor of changing the basics of the Act, and rather than just define a financial threshold, explicitly differentiate only executives and managers: those who have more than a certain number or percentage of the company’s employees reporting directly or in aggregate to them. In this way, professionals — like programmers, designers, marketing creatives, MDs, and so on — would be eligible for overtime pay after 40 hours.

Some might worry that this would decrease hiring, since there is an implicit increase in labor costs, but Eisenbrey says we should not expect that:

Research suggests that employers have a rough idea of how much overtime they will need from a given hire and adjust the base wage down accordingly. This means that at least some part of the burden of an increased overtime premium falls on the worker. But more important, if employers want to avoid paying overtime, they have an easy way to do so: Hire new workers to do the extra work at the standard wage. (This, again, was one of the objectives of the original law.)

As just one example of where this might play, consider the news this week that Goldman Sachs is telling its junior employees — note they are junior — to take off at least 4 weekend days a month. Apparently it is the norm at the large banks for junior analysts and associates to work everyday, and long hours. Rather than hire more workers, these banks simply have encouraged this unsustainable model as part of the process of ordination as a master of the universe.

Given their soaring profits — even if they are collectively going to fork over $50 billion to settle claims against mortgage illegalities in the housing bust — they could afford to double their junior ranks.

And at the other end of the time-at-work topic, The Bureau of Labor Statistics reports that the number of older workers is growing, and by 2022, they project that 31.9% of those ages 65 to 74 will still be working compared to with 20.4% in 2002 and 26.8% in 2012. The chart below is from the Pew Research Center based on numbers from The Bureau of Labor Statistics.

DN_Labor_Participation

From the Bureau’s report:

From 2012 to 2022, the overall labor force will continue to age, and BLS projects that the number of workers in the 55-years-and-older group will grow by 28.8 percentage points, more than 5 times the 5.5-percentage-point growth projected for the overall labor force. The older group’s share of the total labor force has been on an increasing trend since 1992, when older workers accounted for 11.8 percent of the labor force. By 2002 the share had risen to 14.3 percent, and it reached 20.9 percent in 2012. BLS projects that the share will increase further, to 25.6 percent in 2022.The number of workers in the older age group is anticipated to grow by nearly 9.4 million during the 2012–2022 period, the fastest growth among all age groups and an increase representing a 2.6-percent annual growth rate. So, as the 16-to-24-year-old labor force is decreasing and the 25-to-54-year-olds are barely growing, the 55-and-older group is growing by record numbers.

The work force will decrease over the period, but a record and growing number of older workers will opt to stay at work, partly due to better health and greater longevity, but also because they haven’t been able to save enough to retire.

Perhaps backing away from the cult of overwork — like that at Goldman Sachs, and many professions and industries, like medicine and programming — and moving the threshold for overtime and who’s eligible to receive it might change both of those trends.

Relevant Analyst
Stowe Boyd

Stowe Boyd

Lead analyst, future of work Gigaom Research and stoweboyd.com

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