I was reading this
article when I came upon the following sentence.
"Labor unions, however, say the new rules are intended to reduce employers' costs by cutting the number of workers who are eligible for overtime pay."
A thought occurred to me at that point: not only can they save money by reducing overtime costs, they can also do it by reducing the size of their work-force altogether. Lets say a company has a skilled worker whose eligibility for overtime pay was stripped due to these new rules. He is paid $20 per hour. To complete a work unit would normally take him 12 hours on his own. That would cost the company $280(Fig. 1) to complete that work unit. Now, lets say that by hiring an unskilled laborer, for $10 an hour, the two of them can complete the job in 8 hours. That would cost the company $240(Fig. 2) to complete the same work unit. That is a savings of $40 per work unit. Now, after these rules take effect, the company can “lay-off” the unskilled worker and require the skilled worker to complete the unit himself and not be forced to pay him overtime. The cost for the work unit is still $240 (Fig. 3.) If you add, say, $5000 per employee, per year for benefits however the savings would really add up. A company with 50 such relationships could save $250k per year. A company with 1000 would save $5-million Does this make sense for a business to do? If so, does anyone think that this won’t happen?
Jay
(Fig. 1)
$20/hr. x 8 hrs. = $160
$20/hr. x 1.5(time and 1 half) = $30/hr.
$30/hr x 4 hrs= $120
$160+$120= $280
(Fig. 2)
$20/hr. x 8 hrs = $160
$10/hr. x 8 hrs = $80
$160+$96= $240
(Fig. 3)
$20/hr x 12 hrs= $240
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