The White House argues that making labor more expensive will lead not to less demand for it but a surge in middle-class incomes:
Increasing overtime protections is another step in the President’s effort to grow and strengthen the middle class by raising Americans’ wages. This extra income will not only mean a better life for American families impacted by overtime protections, but will boost our economy across the board as these families spend their hard-earned wages.
This sort of thinking obviously appeals to many people, but it's simply wrong. It presumes that wages are simply set by the whimsy (or more likely, the stinginess) of the employer, who always wants to screw his workers rather than keep them happy. There is always play in the labor market, with some people being overpaid and some being underpaid. But by and large, labor markets do a pretty good job of setting compensation levels that reflect a given worker's skills and value to firms, while also pricing in the ability of companies to cover costs and thus stay in business. Price-fixing, whether it's for good or for labor, interferes with the way that prices allocate resources and reflect supply and demand across an almost infinite number of dimensions. This isn't to claim markets are perfect, but they do a far-better job of pricing relative value than any bureaucrat can do—or for that matter, any bean counter in management at a given firm.
As with the minimum wage, simply jacking up overtime benefits for workers via government edict will have the effect of shrinking demand for labor. Strangely, even the government kind of understands that. Here's what Obama's Department of Labor figures might happen as a result of its latest intervention:
http://reason.com/blog/2016/05/18/why-obamas-new-overtime-regs-will-hurt-m
Increasing overtime protections is another step in the President’s effort to grow and strengthen the middle class by raising Americans’ wages. This extra income will not only mean a better life for American families impacted by overtime protections, but will boost our economy across the board as these families spend their hard-earned wages.
This sort of thinking obviously appeals to many people, but it's simply wrong. It presumes that wages are simply set by the whimsy (or more likely, the stinginess) of the employer, who always wants to screw his workers rather than keep them happy. There is always play in the labor market, with some people being overpaid and some being underpaid. But by and large, labor markets do a pretty good job of setting compensation levels that reflect a given worker's skills and value to firms, while also pricing in the ability of companies to cover costs and thus stay in business. Price-fixing, whether it's for good or for labor, interferes with the way that prices allocate resources and reflect supply and demand across an almost infinite number of dimensions. This isn't to claim markets are perfect, but they do a far-better job of pricing relative value than any bureaucrat can do—or for that matter, any bean counter in management at a given firm.
As with the minimum wage, simply jacking up overtime benefits for workers via government edict will have the effect of shrinking demand for labor. Strangely, even the government kind of understands that. Here's what Obama's Department of Labor figures might happen as a result of its latest intervention:
http://reason.com/blog/2016/05/18/why-obamas-new-overtime-regs-will-hurt-m
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