Changing The Rules Of Work

Though it was far from front-page news, the Obama administration’s Labor Department action this month on overtime pay may be one of the most significant of his entire presidency. 

Prior to the new rules change, employees earning more than $23,500 a year (a salary close to the poverty level) could be re-classified as managers, allowing their employers to avoid paying them the time-and-a-half overtime premium, or even paying them any extra at all for working more than 40 hours a week. While manufacturing workers with supportive unions are usually able to prevent such re-classifications and do receive time and a half, many service workers are not protected.

The Labor Department just raised the salary cap to $47,000, meaning that some 12 million Americans will now receive more pay for their work, or that employees will not be required to work more than a 40-hour week.  The $23,500 ceiling has been in place for decades; were it to have kept pace with inflation, it would now be about $69,000.  Still, this is real progress.

To the extent that the new rules discourage long working hours and increase overall employment, they are a godsend, though for the lowest-paid workers, they must be coupled with pay raises.  It should be understood that the original overtime provisions in the 1938 Fair Labor Standards Act were designed to stop the use of overtime and spread work around.  But as benefits became a larger part of the compensation package, it turned out to be more profitable for businesses to hire fewer workers and work them longer, even with the time-and-a-half provision. 

The new rules, and the right to health care provided by the Affordable Care Act, provide far more freedom and protection for workers from onerous work requirements.  As many as two million Americans were able to leave jobs they hated with the passage of Obamacare, because the loss of those jobs wouldn’t mean the end of health insurance for them. 

Time for a national discussion of work and leisure

What all of this should stimulate is a new national discussion about the nature of work in America, and the age-old idea of work-leisure balance.  The Eight Hours Song, sung by workers in the 1880s, concludes with the chorus:

Eight hours for work

Eight hours for rest

Eight hours for what we will.

Of course, as economist Heather Boushey points out in her new book Finding Time, with both parents working, families now eat up much of those “eight hours for what we will” in domestic chores, leaving far less free time than they had when one breadwinner was enough—couples now average 500 hours more paid work than in 1970.  But that was generally a sexist arrangement—dad worked for pay and mom did the domestic duties, with far less recognition.  Understandably, feminists were not happy with this.

Still, a big question persists—why two full-time jobs, often with overtime added?  Given that US productivity has more than doubled since the 1960s, why couldn’t both parents now work 20, 25 or 30 hours a week and still provide an even higher material standard of living than back then, a time when most people felt pretty affluent?  This is fundamental.

 The inequality factor

The answer is pretty clear: for a variety of reasons, since 1980, wages have not kept up with productivity and the share of income going to workers has fallen sharply.  What accounts for this?

1. Low-wage foreign competition, furthered in part by questionable trade agreements.
2. The reduction of union representation from 30% of the private workforce in 1980  to 7% today.
3. Tax redistribution (and multiple loopholes) favoring the rich and reducing formerly low-cost services such as college education.
4. Speculation by those who have benefited from the tax cuts, driving up the price of essential goods such as housing.
5. Loss of defined benefit pensions and employer-provided health care.
6. A steady decline in the real value of the minimum wage.

Businesses will argue that all these changes, which increase inequality and encourage more people to work longer hours, are needed to “compete in the global economy.”  But in fact, other nations provide far higher levels of compensation and social services despite even more serious competition.  It should be understood that the U.S. has an enormous domestic market, with 86% of our production being sold to Americans.  Only 14% must be sold on the global market.   By contrast, many small countries in Europe produce more than half of their output for global consumption.  They are able to do so while offering better living standards to their workers.  Germany, for example, maintains the world’s second largest manufacturing sector while paying its highest total compensation of salaries and benefits to employees.  Its balance of trade is far better than ours, so it is clearly able to compete. 

The secret to this is that these European companies accept lower rates of profit and executive compensation.  Where U.S. CEOs earn 300 times as much as average workers, German CEOs only earn 30 times as much.  Moreover, under a law imposed by the American occupation forces after World War II, German corporations are required to have half of their boards of directors elected by the workers.  This system, called co-determination, means that while workers might reduce salaries to remain competitive, they will not ship their manufacturing plants to China as we have done.  In other European countries, Works Councils, either union or non-union, help set company workplace policy. 

An extreme makeover

To improve the American workplace and fully engage workers, while protecting their health and their right to “time for what we will,” an extreme policy makeover is necessary:

1. Democratize the workplace by introducing co-determination and works councils as in Germany, Sweden, etc.
2. Abolition of mandatory overtime (as in Finland and Portugal).
3. Provide single-payer health insurance to reduce employee’s dependence on their jobs for health care and to reduce the high costs to business (for example, in Canada, cars can be made for $1500 less because the companies do not have to provide the health insurance).
4. A more progressive income tax and capital gains tax to decrease windfall CEO compensation and raise funds for needed social supports such as free college education.
5. The right to reduce working hours to part-time with no reprimands, pro-rated benefits and no reduction in hourly pay, as in the Netherlands.
6. Increase the minimum wage so that workers do not need multiple jobs.
7. Provide paid family leave, paid sick days and paid vacation time as is the case in every other wealthy country and most poor ones.

Join us in Seattle

The Take Back Your Time movement, of which I am a co-founder, has been working for many of these things for 14 years, hoping to bring the United States into the 21^st Century as it is experienced in most wealthy countries.  We will be discussing many of these issues at our Time Matters: National Take Back Your Time Conference at Seattle University August 25-27.  Do think about joining us.  Information can be found at www.takebackyourtime.org

The Gallup Poll finds that Americans are 20% happier on weekends than on workdays, yet our work-time seems to be expanding while our leisure is being lost.  It doesn’t have to be that way.