Do America's decades-old overtime laws make sense anymore? Despite the litigation they are generating, there's almost no political momentum to change them. The initial idea was that companies would choose to hire extra workers rather than pay existing ones time and a half. But that calculus doesn't hold these days, given the enormous fixed costs of such things as benefits and training for each additional employee. Some economists, meanwhile, contend that overtime rules fall short on assuring that workers get paid more for time they put in beyond 40 hours each week. When the law requires overtime pay, they argue, the market will adjust regular wages down, so that a $450-a-week job that requires 45 hours still moves back toward $450. Stephen J. Trejo, an economics professor at the University of Texas at Austin, says a study he did shows about half of the extra pay is erased. Of course, workers on the lowest rung of the pay ladder have minimum-wage laws to protect them from such a shift.
Economics professor in Business Week
News Administrator | Oct. 3, 2007