Steve Chapman

To cope with the mandated pay increase, companies can simply make sure no one works more than 40 hours a week, hiring more workers to divide up the existing work. That's why the change will actually increase the total number of jobs, says economist Daniel Hamermesh of the University of Texas at Austin, who favors it.

"I think it's a job-creation measure," he told me. But even Hamermesh says the total amount of work done will go down rather than up, because the measure raises the price of labor to employers.

It obviously does. First, more workers will qualify for overtime pay. Second, employers who prefer to avoid that extra cost will have to incur a different one -- for recruiting, hiring, managing and providing benefits to the extra workers needed to cover the shortfall.

Economist Tim Kane of the Hoover Institution at Stanford University says the real choice companies will face is not about how to divide up the work among employees. "The tradeoff is not with different labor, it's with capital," he explains. When the government artificially raises pay, "workers at the margin get replaced with machines."

But Obama doesn't have to worry about being held accountable for the unwelcome consequences. The beneficiaries will be grateful to the president for his kind generosity. The victims, who will lose jobs or never be hired in the first place, will blame someone else.

That's why the move was irresistible to the White House. For politicians, meddling in markets means never having to say you're sorry.


Steve Chapman

Steve Chapman is a columnist and editorial writer for the Chicago Tribune.
 

 
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