Washington, DC, August 5, 2003 --  

The Labor Department's plan to stop requiring overtime pay for thousands of American workers is a penny-wise but pound-foolish move that will push America even further out of step with the rest of the developed world. Already, Americans work more hours each year than those of any other developed nation.¹ The altered regulations will probably increase this further. If adopted as planned, the Labor Department would reclassify many marginally professional positions so employers wouldn't have to pay a 50 percent premium for work in addition to the standard 40-hour week.²

Bush administration officials say the plan is intended to modernize the 65-year-old Fair Labor Standards Act, which first mandated a 40-hour work week during the Great Depression. But small-government advocates who might otherwise cheer this as a milestone in the march toward deregulation may be missing the bigger picture. America's regulatory structure is highly geared toward encouraging overtime work. Mandates at the state and federal level require expensive benefits for full-time workers, including heath insurance, vacation, and sick leave.

If a part-time employee works additional hours to put him over the full-time threshold, the mandates kick in, imposing fixed costs on his employer. These costs are most expensive, per hour of work, when the employee is working the minimum number of full-time hours. For each hour of overtime, the hour-relative cost of those fixed expenses goes down. Thus, an employee working 80-hours per week is far more profitable for an employer than two employees working a 40-hour week. Any meaningful effort at deregulation must address this existing regulatory incentive for overtime.

Defenders of the American system of long working hours like to point at productivity numbers, showing that America's system is far more competitive than Europe's system where people work less. This productivity level has led America to a staggering per capita income of $35,200,³ the highest of any large developed nation. But much of America's income comes not from its inherent productivity but from the fact that Americans just work more hours. When productivity is measured per hour of work versus per calendar year, American productivity lags behind that of six European countries.⁴

Figures from the Bureau of Labor Statistics show that the number of hours worked by Americans has stayed about the same over the past 20 years.⁵ During the same period, the average income, adjusted for inflation, has soared, leading to a huge increase in disposable income and a red-hot consumer products market. American homes are now filled with so much stuff that a second SUV is needed just to haul it all around.

This more work, more money, more stuff culture exists in stark contrast to that of other developed countries where leisure time is more highly valued. Two years ago, France became the first developed nation to have its government mandate a 35-hour work week. French citizens enjoy this short work week along with a generous 5-weeks of paid vacation each year -- a vacation allotment that is typical of all countries in the European Union.⁶

And Europe is not alone. In Japan -- a country once feared by Western economists for its 6-day work week -- people now work less hours and take more paid vacation days than Americans. Today it is Americans, not Japanese, who are the developed world's feared drones of seemingly nonstop work.

It is a matter of opinion whether or not America's long work hours are a good thing. As technological advances bring ever-higher productivity, there will always be a choice between working fewer hours, and enjoying ever-greater income. In recent decades, Americans have chosen solely the later, while the rest of the world has chosen a combination of the two.

What is clear is that the American government has no business imposing one option over the other through regulatory incentives. Yet this is precisely what it is doing. The Labor Department plan simply removes a weight from the light side of an already unbalanced regulatory scale. The result: Americans will do more work, get bigger incomes, and solidify their status as the worker drones of the developed world.

Related Web Columns:

Making Jack a Dull Boy, September 5, 2000

Notes:

1. Employment Policy Foundation, Facts & Fallacy: Hours of Work: A Matter of Choice for Most Working Americans, October, 1999

2. The Washington Post, Senators Say Proposed Changes Would Harm Workers, July 30, 2003

3. OECD, Gross Domestic Product for OECD Countries Monthly Update, July 2003.

4. The Economist, Productivity, Productivity, February 20, 2003

5. U.S. Bureau of Labor Statistics, "Average weekly hours of production or non-supervisory workers on private non-farm payrolls, 1947-1999," September 2000

6. International Labor Organization, Condition of Work Digest 1995: Working time around the world, 1995