Question:
In 1993, when nearly 9 million people couldn't find jobs, other Americans were putting in the most overtime since the government started keeping records in the 1950s. With factory workers averaging 4.2 hours of overtime per week, the Bureau of Labor Statistics said more than a tenth of all work done in the nation's factories was performed on overtime. "If we could go back to the amount of overtime worked in 1982, we would create 3 million new jobs without increasing the federal deficit," said John Zalu sky, an economist at the AFL-CIO. He said many workers are putting in extra hours against their wishes. One reason employers were going the overtime route, economists said, was that overtime pay didn't cost much extra. Fringe benefits, representing as much as 40 percent of labor costs, were mostly covered by the first 40 hours worked. And the overtime hours generally were worked by employers' most skilled and productive people. Beyond that, using overtime avoided the cost of hiring and training new workers, finding space for them and dealing with the added paperwork. Because of all those factors, Zalu sky calculated that paying a skilled worker time-and-a-half actually cost employers only about 3 percent extra.
a. How does overtime pay affect direct labor cost? Variable overhead?
b. Obviously, paying overtime to already employed workers makes better financial business sense than does hiring additional workers. If, however, workers would prefer not to work overtime but do so to maintain their jobs, how does overtime affect the ethical contract between employers and employees?
c. What effects might overtime have on job efficiency? On job effectiveness (such as quality of production)?
d. Would you be in favor of limiting allowable hours of overtime to have more individuals employed? Discuss this question from the standpoint of the government, the employer, a currently employed worker, and an unemployed individual.