Chapter 84 Question 075

Why does the relevant law in the United States stipulate that it is illegal for employers to allow adults to work overtime voluntarily without paying overtime wages? The federal Fair Labor Standards Act (Fair Labor Standards Act) stipulates that as long as employees work more than 40 hours a week, employers must pay overtime wages for the excess.Free-market economists often attack the rule, noting that even when employers don't pay overtime, many people voluntarily work longer hours.Because of the barriers created by overtime pay, most employers only require employees to work overtime when there is an unexpected shortage of capacity.And that happens rarely.Why is the law prohibiting employees and employers from making reciprocal contracts on overtime pay?

The logic of requiring employers to pay overtime is similar to the logic of requiring employers to limit workplace safety risks.This means that individual employees can increase their chances of promotion by working longer hours, but if everyone else follows suit, everyone's promotion prospects will be the same as before when there was no overtime.It turned into a life-and-death battle, with everyone required to work until 8pm every day to keep from falling behind. Even leaving aside the question of promotion, it is a misconception that individuals working longer hours may appear attractive in the context of a larger group.For example, if one person works longer hours, then this person can afford a house on a better campus; but if everyone works longer hours, it may only drive up the price of houses on that campus.The end result is that still half of the children can only go to the poorer part of the school.

Adam.Smith's invisible hand rests on the implicit premise that individual rewards depend only on absolute performance.But in fact, most things in life are determined by relative position.