A recent article in The New York Times (“Obama Will Seek Broad Expansion of Overtime Pay”) reports that,
“President Obama this week will seek to force American businesses to pay more overtime to millions of workers, the latest move by his administration to confront corporations that have had soaring profits even as wages have stagnated.
“On Thursday, the president will direct the Labor Department to revamp its regulations to require overtime pay for several million additional fast-food managers, loan officers, computer technicians and others whom many businesses currently classify as “executive or professional” employees to avoid paying them overtime, according to White House officials briefed on the announcement.”
The rationale for this increase is probably the belief that if people’s incomes rise, they spend more and theoretically stimulate the economy.
But, on the other hand, if corporate labor costs rise, either corporate profits fall and/or prices go up. If prices rise, the economy tends to slow.
So what will happen? By raising some employee’s incomes, will we stimulate or slow the economy?
Answer: That’s the wrong question.