Raising Overtime Penalties Might Create More Jobs

President Clinton wants to create much-needed high-wage jobs by jump-starting the economy, but unless we do something more imaginative, the high unemployment rate isn’t likely to drop significantly.

The trouble is this: Productivity is going up--the output of goods and service rose at an annual rate of 4.8% in the last quarter of 1992--but the number of full-time jobs is not increasing, and workers’ standard of living is declining because they are not sharing in the productivity gains.

Sure, the unemployment rate slipped slightly, from 7.3% to 7.1% in January. But that was because 500,000 more people left the work force, taking early retirement or giving up after months of fruitless job hunting. Unless you are actively looking for a job when the government makes its unemployment survey, you are not considered unemployed.

The real jobless rate, when you count those who want jobs but cannot find them, is close to 14%, according to estimates by the Bureau of Labor Statistics.

The President’s plan to stimulate the economy and invest about $30 billion in rebuilding the infrastructure will help, but it certainly will not return this country to full employment.

To do more, we ought to give serious consideration to revising an old idea: Increase the penalty on employers who work their employees more than 40 hours a week, thereby creating more jobs.

Around the turn of the century, there were massive street demonstrations by workers demanding a reduction in brutal 10- and 12-hour work days, six days a week. The physical toll on workers was the driving force behind the demand, but also involved was the need for more jobs.

Finally, 55 years ago, Congress approved the eight-hour day, 40-hour work week and that standard has been in effect ever since. Congress also required employers to pay workers time and a half after 40 hours to discourage overtime that was used as a way of avoiding hiring more workers.

But because the cost of fringe benefits such as health insurance has grown significantly in recent years, it is often cheaper for a company to keep the same worker on the job for a few extra hours a week than it is to hire another at straight time.

Germany and other European countries are reducing their work week to 37 and even 35 hours in an attempt to cope with unemployment. In many healthy industries, that increased the number of jobs.

In any case, the chance of reducing the work week below the 55-year-old standard of 40 hours in the United States is almost nil. In fact, many U.S. employers are going in the opposite direction. They are increasing the work week instead of hiring more employees.

The average work week for full-time employees is now 43.5, the highest level since 1966.

The AFL-CIO wants Congress to make the original deterrent concept of the overtime premium more effective by raising it to double time for hours worked over 40 hours per week. That could help, but increasing the penalty to double time and a half, or even triple time, would serve as a far more effective deterrent.

Researchers at the Bureau of Labor Statistics say if we only go to an average 40-hour work week, another 4 to 5 million jobs would be created. That would dramatically reduce the number of jobless, who now total more than 9 million.

Clinton might also consider another common European concept: mandatory vacations of four to five weeks a year as a way of sharing the jobs we do have.

Many workers want and need overtime since it helps them keep up with rising living costs, but that means fewer jobs for the rest of us. That problem could be eased by raising the $4.25 hourly minimum wage, which hasn’t been increased in nearly two years.

Even more damaging to workers is the steadily increasing number of employers who rely on “disposable workers,” those who want full-time jobs but are hired instead as temporaries or part-timers. They are easily discharged, and usually get no fringe benefits such as health insurance.

Usually companies just quietly cut the number of full-time workers, and today nearly 25% of all U.S. workers are listed as temporary or part-timers. Many want it that way, but 6.4 million don’t. They want and need full-time, regular jobs.

One company--Bank of America--last month publicly announced its decision to substantially increase the number of part-time workers and eliminate fringe benefits, including health insurance, for many of them. Fewer than 10% of the bank’s tellers now work full time.

Other companies escape public criticism by making no public announcement of their moves to part-time work. But the Bank of America’s public announcement caught the attention of the California AFL-CIO, which promptly withdrew its funds from the bank and called on all unions to do the same.

As John F. Henning, head of the labor federation put it: “In the name of further profit, the company is depriving thousands of its employees of access to medical care and exacerbating a problem the entire nation is struggling to confront.”

The drive to increase profit at the expense of workers’ jobs and benefits is intensifying across the country, and in the long run, the entire economy will suffer.

With the enormous federal deficit, it will be hard for President Clinton to find enough money to stimulate the economy enough to meet our needs for new, well-paying jobs. So let’s take a new look at the possibility of sharing the jobs we have by at least re-establishing the 40-hour work week as our standard. It isn’t really a radical idea, and it just might work.