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.