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CBO judges effect of overtime rule reversal

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in Employment Law,Human Resources

It may be small comfort to employees who thought they were about to become eligible for overtime pay on Dec. 1, but the Congressional Budget Office is making the argument that they will ultimately be better off without all that extra OT pay.

To be sure, a federal court injunction temporarily prohibiting the Department of Labor from implementing new overtime rules produces some short-term winners—employers—and short-term losers—white-collar workers who were in line for overtime pay.

But in the long run, a report to Congress contends, American workers would eventually see their real incomes rise anyway, essentially making up what they would lose in anticipated overtime income if the rules had gone into effect.

Those were the findings of a recent “scoring” exercise run by the Congressional Budget Office, the nonpartisan federal think tank that advises Congress on the fiscal effects of policy proposals. In early November, the CBO weighed what would happen if the overtime rules were scrubbed—either by a court or by legislative or executive branch action—and employers reverted to the existing rules.

Among the CBO conclusions if the rules were reversed: Employees would, in fact, wind up working more hours for less pay.

However, employers would save money and earn higher profits by paying employees less and by being able to redeploy staff from managing the new overtime rules to more productive and profitable work.

With greater profits, overall household income would slowly increase, the CBO concluded. Employees would pocket more money through pay raises driven by their employers’ higher profits and because goods and services would be cheaper if producers did not have to pay as much overtime.

Congress and the Trump transition team will no doubt scrutinize the CBO report, and may use it to justify a permanent roll-back of the new overtime regulations early in 2017.

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