Overtime a relic from old economic order

The traditional employees' share of the workforce is falling as more and more people work part time, part year, on contract or as self-employed

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Roslyn KuninEvery generation thinks that the music of their youth is where it’s at. We select our listening channels by the decades in which we grow up.

I had an old aunt who learned to dance in the era of Latin music – rumbas and sambas. That was real music for her and she spent her life waiting for it to come back. Of course, it never did.

Many people, some quite important, wish that – like the music of our youth – things would go back to the way they were. One such person is the U.S. president, Barack Obama and his attitude towards overtime pay.

The concept of overtime pay was successfully introduced by unions and spread throughout the labour force in the 20th century. If an hourly paid worker worked more than the standard workweek, usually 40 hours, he was to be paid at a higher rate, usually time-and-a-half. Overtime rates also often applied to work on statuary holidays. Gradually, the idea of overtime pay became part of legal labour standards covering most full-time workers.

Bosses, managers, executives and better paid salary workers were not covered by overtime pay requirements. In U.S. labour standards, the annual salary level above which overtime is not required to be paid is $23,700. These days, this does not put one in the high salary or management category. So Obama, by executive fiat, is raising the line to $50,400.

No problem with the more realistic salary level. The problem lies in the assumption that the typical worker still works in a full-time, hourly paid job such as all those nice unionized manufacturing jobs that used to be the backbone of the economy.

While regular, traditional employees still make up the majority of workers, their share of the workforce is falling as more and more people work part time, part year, on contract or as self-employed (as I have been for decades).

Employers prefer this way of working as it gives them more flexibility and reduces legal obligations, such as paying overtime, although the hourly or daily rate can be higher. As well, during recessions, they do not enjoy laying off good workers who had expected ongoing work. Finally, rapidly adjusting markets, technology and global conditions mean that the number and kinds of staff needed are constantly changing.

Many workers still prefer a steady, permanent 20th century type job, but not all do. Smart phones have given all of us more flexibility both as consumers and in how we earn a living.

One example is the Uber rider service. That many drivers find it an acceptable and even a preferred way to work is evident by the numbers of people driving for Uber.

This view is not unanimous. In California, some Uber drivers are bringing a class action suit against Uber saying that they should be treated as employees with related benefits. Other Uber drivers have opposed the class action saying it does not represent their views or interests. They prefer the freedom to set their own hours and work other jobs; things they could not do as employees.

The front-running Democrat in the 2016 U.S. presidential election, Hilary Clinton, has expressed a preference for turning all such contract workers into employees. She’s misguided. There should not be a unilateral declaration that all contract workers become employees. First, this would cause the total amount of available paid work to decline and not only for Uber drivers. Second, if something can be done, it will be done and we cannot legislate it away any more than we can pass a law against the common cold. Informal work will continue, but under the table, making everyone involved more vulnerable.

Better to set some basic standards, such as insurance requirements for contract workers, because this way of working is here to stay. The old ways of working, like the rumba and the samba, are not going to come back.

Troy Media columnist Roslyn Kunin is a consulting economist and speaker. 

© Troy Media


The views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.

Roslyn Kunin

Dr. Roslyn Kunin is president of the Vancouver Institute and has been chair of the Vancouver Stock Exchange, WorkSafe BC, and Haida Enterprise Corporation. She has also been on the boards of the Business Development Bank of Canada (BDC) and the National Statistics Council.

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