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A business upside to Obama’s overtime move

President Obama signed an executive order to expand overtime pay for American workers at the White House Thursday. (Video: The Associated Press)

Business groups are crying foul over the news that President Obama wants to expand overtime rights to millions more workers. It’ll cost jobs to force businesses to spend more on paying time-and-a-half, they say. The costs of hiring a worker go beyond just the wages people are paid — there are 401(k)s to fund, health insurance premiums to help cover and equipment to buy for each employee.

But what all that handwringing ignores is that there could be some savings, too. Research has shown over and over that as workers’ hours increase, productivity drops and inefficiency ticks up. So for businesses that choose to hire more workers at 40 hours a week rather than pay current employees overtime — as supporters of the change say might happen — there could be an upside.

For instance, one 2008 study examined 2,214 middle-aged British civil servants working either 40 or 55 hours a week. By comparison, the ones working more than 55 hours showed lower vocabulary skills and a decline in reasoning capabilities.

A 2011 report by the UN’s International Labour Office summarized years of research on the effect of long hours on productivity. It cited study after study that showed links between reduced hours and better performance. In addition to productivity loss, the report found other obvious risks. “Additional working hours may reflect a worker’s work ethic or commitment to the job,” it says. But "at some point, longer working hours inevitably begin to create risks and time conflicts that interfere not only with the quality of non-work life, but also on-the-job performance.”

This is hardly a new idea. A hundred years ago, Henry Ford famously doubled workers’ pay and lowered the number of hours his employees worked each day from nine to eight. That not only meant he could institute three shifts instead of two, and that workers could be more productive on the job given they had more rest and free time. It also meant they had time to go out and consume more goods. His success with the move helped to enshrine a maximum work week in the Fair Labor Standards Act of 1938, which first instituted overtime.

That’s the law under which President Obama has some leeway to define the rules. Currently, anyone making more than $455 a week can be classified as "executive, administrative and professional” and become "exempt" from receiving overtime. As a result, many companies can make fast-food supervisors or retail assistant managers salaried, then ask them to work more than 40 hours a week without extra pay. The administration, the Post reports, has suggested that threshold (unchanged in a decade) should be raised to somewhere between $550 and $970 a week, or $28,600 and $50,440 a year.

One widely cited 2012 Salon article about the origins of the 40-hour week, first published on AlterNet, put it this way: “the single easiest, fastest thing your company can do to boost its output and profits — starting right now, today — is to get everybody off the 55-hour-a-week treadmill, and back onto a 40-hour footing.”

That may be taking it a little far. And how exactly the proposal would work in an era of  24/7 email demands is a big question mark.

But it’s hard to argue against the idea that reducing people’s hours could make a big impact on increasing how well they work. When hours are more reasonable, people are less likely to be distracted by family demands while they're at work. With a more sane work schedule, workers are at least better poised to get a good night's sleep and be less susceptible to illness. And reduced hours could also very well lead to less turnover and therefore lower costs in acquiring new employees to replace the ones who've burned out. (That's apparently a big reason Henry Ford did it.)

People get fatigued. Energy has its limits. Whatever costs the president's plan may have for businesses, there's likely to be a benefit, too.

Read also:

The three types of job burnout

5 reasons why you shouldn't work so hard

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