MURPHY: Department of Labor and an uncertain business environment

Photo by Matthew Serafin / matthew.serafin@marquette.edu

Photo by Matthew Serafin / matthew.serafin@marquette.edu

The way things are set up now, uncertainty reigns – which is bad for businesses and their employees alike.

Businesses are collectively bracing themselves as they prepare for the Department of Labor to issue new rules regarding employee classification.

The announcement is expected this summer. Currently, salaried employees making less than $23,660 are eligible for overtime pay. It is expected that this threshold could be raised to $50,440, making an estimated 5 million more employees eligible.

The Huffington Post pointed out that the threshold needed to be updated. After all, it was set thirty years ago, and the effects of inflation have disqualified many salaried employees who might have earned overtime then.

But we shouldn’t be so quick to rejoice. Like anything else, this benefit will come at a cost – one that may fall heavily on those of us soon to join the labor force.

Businesses are not going to sit back and absorb the cost of higher labor themselves. They will look for ways to economize, the same way they did after the Affordable Care Act took effect.  After that, they began to rely more heavily on part-time workers. Businesses will have to cut workers’ hours or hire fewer workers to contain labor costs, which could translate to more responsibilities and fewer hours to complete them for workers.

Fortune points out that businesses are likely to face another expense in the face of these changes: lawsuits.  Last year, there were 8,160 lawsuits regarding overtime pay. That number is expected to grow by eight percent this year.

On top of this, Democratic candidates Hillary Clinton and Bernie Sanders want to raise the federal minimum wage to $12 and $15, respectively.

All of this makes for an uncertain, expensive arena in which to do business. Uncertainty never encourages investment or growth.

We need standards that reduce uncertainty. The threshold for overtime eligibility, the minimum wage, and other federally mandated maximum and minimum laws need to be tied to something. Social Security payments are tied to the Consumer Price Index, so why not anchor these other variables to inflation or something else that is more substantial? Basing these levels on whichever party has managed to shuffle its way into office seems arbitrary at best.

Anchoring these variables would benefit businesses by reducing uncertainty and workers by keeping their pay in line proportional to the rest of the economy.

In the meantime, expect fewer hours, unless you’re a lawyer.