Kitchen Table Economics

The 3 Worst Labor Regulations

Red Tape

Employers and employees are under attack from a federal government that continues to threaten job creation with burdensome labor regulations. Here are the three worst:

    1. Overtime rule. If you are a salaried employee making $23,600 or less, you currently get overtime pay if you work more than 40 hours per week. But the Department of Labor has published a new regulation increasing that threshold to $47,500 per year. The rule—which goes into effect on December 1st—will make millions of more employees eligible for overtime pay. While that sounds like a good idea, doubling the overtime threshold imposes higher labor costs on employers, who could be forced to cut costs by reducing career opportunities, benefit packages, and promotions. Being “put on salary” has long been one of the first steps on a true career. It gives employees a steady paycheck they can count on, and allows young workers to prove themselves in a new job. When this new rule goes into effect, many of those people who were on salary will be put back in an hourly position and their hours will likely be capped.
    2. Joint employer. Franchising has created more than 825,000 small businesses in the country, supporting 18 million American jobs and adding more than $2 trillion to the U.S. economy. It has been especially embraced by minority entrepreneurs, who make up 20 percent of the franchise model. But the “joint employer” rule—a new regulation from the National Labor Relations Board (NLRB)—threatens this system by deeming the parent company and franchisees “joint employers,” which makes franchisors liable for the thousands of daily decisions usually made by independent small businesses. Why is that a problem? Because if parent companies are liable for all of their small franchise owners, they may be leery of taking on new owners. They might also raise franchise fees to cover any potential lawsuits. And local entrepreneurs may be hesitant to start a new business through franchising if the parent company is looming over their decisions.
    3. Super High Entry-Level Wages. Legislators and activists around the country are pushing for minimum wage hikes as high as $15 an hour. While this might sound like a good way to raise incomes, small business employers have a hard time handing a doubling of their labors costs. Many are turning to more computer automation and having to layoff employees that have become too expensive. A better solution is the Earned Income Tax Credit, or as we call it, the Working Americans Credit. This policy give a tax refund to those who are working at entry-level positions, raising their income without threatening their jobs.