Labor laws create all sorts of unintended consequences and secondary effects. In 2017 the Obama administration was getting ready to make a number of changes in the area of exempt vs non-exempt workers (i.e. overtime pay).
The changes were advertised as a way to help workers get paid more fairly for overtime, but legislation rarely changes economic realities. By expanding the requirement to pay overtime they made it much more expensive to staff entry level management positions. In one non-profit that I was familiar with at the time, the rules would have required payroll to increase by $100,000 - $200,000/year (maybe more, I can't quite remember the details).
As organizations do, they adapted by eliminating almost all of those entry level supervisory positions. People were moved down to hourly workers, with their hours severely constrained, moved up to more senior level management roles that avoided the overtime requirements, or the position was eliminated all together. I don't think anyone was happy with those changes within the organization but it was necessary to keep the organization fiscally viable given the new rules. It also made it much harder to move from an hourly position into management because the leap in capabilities and responsibilities was much greater.
Perversely, the changes were not implemented by the Obama administration due to lawsuits that prevented their implementation at the last minute. By that time, any affected organization had already made the structural changes though. (I don't think the regulatory changes ever occurred).
Anyway, this is a long way of saying the labor market always adjusts to regulatory constraints and TANSTAFL. The general economic principle that when costs increase, demand decreases isn't magically voided by legislation. Expensive labor leads to fewer jobs and makes it more difficult to absorb young people into the job market.
> The general economic principle that when costs increase, demand decreases isn't magically voided by legislation. Expensive labor leads to fewer jobs and makes it more difficult to absorb young people into the job market.
"Basic supply and demand" is almost always wrong for the labor market. You're a monopsony, they're also your customers, etc. Don't assume the obvious is going to happen without actually looking.
> Basic supply and demand" is almost always wrong for the labor market.
We’ll just have to agree to differ. Although I would be curious to hear about examples of this scenario where employers hire more people when the cost of labor goes up.
> Perversely, the changes were not implemented by the Obama administration due to lawsuits that prevented their implementation at the last minute. By that time, any affected organization had already made the structural changes though. (I don't think the regulatory changes ever occurred).
> A new labor law rule — kicked back by a federal judge last month — that would have made almost four million Americans eligible for overtime pay may still have resulted in higher wages for the workers it was intended to help.
> The new legislation would have significantly raised the salary cap under which employees were eligible to earn overtime. In response, some large companies, such as Walmart, gave raises to workers whose pay fell just under the new threshold, making them ineligible for overtime pay. Other companies reclassified salaried overtime-exempt workers as hourly employees, which would make them eligible to earn overtime for workweeks longer than 40 hours.
Thanks for digging up that news report. I wonder though if organizations have drifted back to the previous structures. In the example I was thinking of, I'm no longer directly involved and so I don't know how things have evolved over the last few years.
Possibly... though I suspect other factors also got in there with the past two years and the labor market.
The article (from 2016) finishes with:
> “If someone can get a $5,000 or $7,000 raise by going down the street, why wouldn’t they?” Eisenbray said.
> “For companies that aren’t paying as much as their competitors, they’re going to see their best talent move,” Kropp predicted. “In this segment of the market, people will move for 50 cents or a dollar an hour difference.”
The changes were advertised as a way to help workers get paid more fairly for overtime, but legislation rarely changes economic realities. By expanding the requirement to pay overtime they made it much more expensive to staff entry level management positions. In one non-profit that I was familiar with at the time, the rules would have required payroll to increase by $100,000 - $200,000/year (maybe more, I can't quite remember the details).
As organizations do, they adapted by eliminating almost all of those entry level supervisory positions. People were moved down to hourly workers, with their hours severely constrained, moved up to more senior level management roles that avoided the overtime requirements, or the position was eliminated all together. I don't think anyone was happy with those changes within the organization but it was necessary to keep the organization fiscally viable given the new rules. It also made it much harder to move from an hourly position into management because the leap in capabilities and responsibilities was much greater.
Perversely, the changes were not implemented by the Obama administration due to lawsuits that prevented their implementation at the last minute. By that time, any affected organization had already made the structural changes though. (I don't think the regulatory changes ever occurred).
Anyway, this is a long way of saying the labor market always adjusts to regulatory constraints and TANSTAFL. The general economic principle that when costs increase, demand decreases isn't magically voided by legislation. Expensive labor leads to fewer jobs and makes it more difficult to absorb young people into the job market.