Tags: recession | Obama | overtime | pay

Executive Order on Overtime May Spark Next Recession

By    |   Wednesday, 01 July 2015 07:43 AM

Economists using data to forecast economic growth might want to focus some attention on the White House instead. Based on the pursuit of fairness rather than data, the Obama administration decided 5 million workers deserve a raise.

New rules about who qualifies for overtime could prove to be devastating to small businesses and will most likely hurt millions of employees.

In the past, workers in management positions were exempt from overtime pay rules as long as they made about $11.38 an hour. New rules will require anyone making less than $24.25 eligible for overtime. The old rule might have set the bar too low but the new rule seems high based on what people earn.

Entry-level managers at fast-food restaurants, for example, who have worked their way up to jobs paying $30,000 a year will be forced into hourly schedules. College grads entering the workforce in salaried positions earnings $45,000 a year will be forced into hourly schedules. It’ll be illegal for these employees to exercise initiative by working later to learn their job or earn a promotion.

Businesses cannot always afford to pay overtime so many workers will be forced into hourly positions. They could then see their hours cut and the size of their pay checks reduced.

Productivity will suffer as employers focus on hours worked rather than output. This could be a drag on economic growth.

Prices could rise if employers are unable to control labor costs, leaving everyone paying more and hurting discretionary income.

Pain from the new rules will kick in after they take effect in 2016. Like many Obama administration decisions, this giveaway to supporters will cause pain after the president leaves office.

Odds of a recession in 2016 grow with each executive order and the next president is likely to start his or her term under the cloud of a bear market in stocks.

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MichaelCarr
Economists using data to forecast economic growth might want to focus some attention on the White House instead. Based on the pursuit of fairness rather than data, the Obama Administration decided 5 million workers deserve a raise.
recession, Obama, overtime, pay
311
2015-43-01
Wednesday, 01 July 2015 07:43 AM
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