Sunday, August 02, 2015

The hypocrisy of unpaid overtime

Go to any store, any business and most will tell you the price of what is on the shelf or the menu. Everything has a price. While there are sure to be promotions, even freebies, management decides what is promoted and what must be paid for. When we go shopping, there is an implicit agreement not to haggle in most establishments. We accept the asking price when we get to the checkout stand.

By the same token, most of us negotiate in good faith for our compensation when applying for a job. We assume that we're getting a fair wage when we sign the contract. We assume from the beginning that we're going to be paid for every hour we work. Unfortunately, there are unscrupulous employers who manage to setup their employees to do work that somehow requires unpaid overtime. There are also employers who will outright steal wages by not paying them. Thousands of employers are prosecuted for wage theft every year.

The focus of this post is about unpaid overtime. This is usually in a setting where the corporate culture makes an implicit demand on employees to do extra work, or they could face reduced opportunities for advancement or worse, unemployment. This is to be expected when the job market is weak, just like this one, where even when strong hiring is the trend, wages are not going up. In fact, wages have crept up at just 0.2% this last quarter, the lowest rate in 33 years.

There is reason to believe that unpaid overtime is recognized, but how is it accounted and is there a balance in compensation to the effort exerted by the employee? Some employers may attempt to mollify their employees by reminding them of what Lincoln said, "Don't worry when you are not recognized, but strive to be worthy of recognition." In a good economy, that might make sense.

Recognition comes at the employer's or manager's whim. Recognition doesn't always come with a raise. It usually comes with a perk. A day off with pay. A special parking place. A trophy that rotates every month. Maybe, if the employee is lucky, they get a raise, especially in this labor market.

Now consider the plight of the lowly C-class executive. He knows exactly what he's getting into. He has a compensation consultant that has studied the market inside and out. He has friends in high places that can "put in a good word". He has an attorney that can vet the contract to make sure nothing is "missing". He can assert his rights in the contract and if terminated, he is likely to get a golden parachute. The best part? He has friends on the board of directors who can assist in setting his salary.

The typical C-class executive will demand compliance with the contract that he and his employer signed. The average worker is not empowered to do so for fear of losing his job. The typical C-class executive will put in extra hours because his compensation is based on his performance. But as economist Dean Baker has pointed out, executives often get and retain high pay even when their performance is not so great. Just ask Home Depot.

There is another part of the unpaid overtime story that is often missed: vagueness. Unpaid overtime is like borrowing and that leads to vagueness for both parties. The employee doesn't know what the same service will fetch elsewhere and lives in fear because it's not easy to figure out. The employer doesn't know the true cost of what he's receiving as a gift or stealing from his employee.

If the employer chooses to assign a cost, he is free to do so arbitrarily and the employee may have little recourse other than to find a new job. In this economy, large employers know the market and they know that most employees would rather stay than risk having to find a new job. Oh, the joys of management.

Remember, this sort of implicit policy is made by the "job creators". Besides, who would notice or even point out that unpaid overtime contributes to unemployment? When people work more hours, there are fewer jobs for others to work. These same job creators lobby Congress for public policy that leads to a poor economy. A strong dollar. A low minimum wage. A weak and emaciated union culture.

These job creators, after receiving so much assistance from the government, will then have the gall to tell us that if we just cut their taxes one more time, they will hire more people. We have tried that before and every time, the money went to shareholders, not to labor.

So remember, the next time you hear a "job creator" spouting off about how cutting taxes would help him hire more people, consider the amount of unpaid overtime he's being gifted today.
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