The 40 Hour Work Week (FLSA) – Wolves And Finance

This week we talk about an important business issue, the 40 hour work week. Watch now!

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VIDEO SUMMARY

Last week I made a video about how I am not a supporter of Universal Basic Income, which is the idea to start a new large government welfare program. I do not just like to complain about things. I always try to offer a solution. So if you are concerned about things like income inequality, poverty, and worker’s rights, there is a better solution. I would focus people instead on a critical policy change. This policy change would cost the government $0 and have a tremendous increase of our quality of life. I am talking about the 40 hour work week.

The 40 hour work week is something I have talked about before. Americans are working longer and longer hours. And often for a salary employee, any hours you work over 40 hours, you are working for free. The 40 hour work week is a policy decision. We get together and decide what we value in terms of quality of life. I challenge the business community to think about what the 40 hour work week means and decide if this is something we want to protect.

Let me explain some of the statistics. People working long hours is a problem. According to the Bureau of Labor Statistics the average weekly hours worked in the US is 34.5 hours per week. But this includes part time jobs. Looking closer at full time jobs, Gallup did a poll in 2014 that showed the average time worked by full-time employees is 46.7 hours a week. (
https://www.washingtonpost.com/news/on-leadership/wp/2014/09/02/the-average-work-week-is-now-47-hours/?noredirect=on&utm_term=.6ed9089e71ee ) That is almost another full day of work each week. In certain industries, 60 hours a week is normal. And again, it is common for salary employees to work that extra time for free. So in the United States, we do not really have a 40 hour work week.

You need to understand some history. The 40 hour work week became mandated by FLSA (Fair Labor Standards Act). If we go back to 1890, when the US first started keeping labor statistics, manufacturing workers were working 100 hours a week. We all know what happened. Workers began to organize, form unions, and go on strikes. So in 1938, FLSA was passed, which established the 40 hour work week. FLSA did the following:

Set a minimum wage
Defined a 40 hour work week
Mandated time and a half overtime pay
Prohibited child labor

I think we all agree these are great things. I do not want to live in a country where there is child labor. These are policies we decided as a society that this is the type of country we want to live in.

Here is the problem with FLSA: it narrowly defines a protected class of workers. These workers tend to be your typical blue collar jobs. Manufacturing jobs are protected. Construction jobs are protected. But most white collar workers are excluded. Let me be clear here: most white collar workers have no rights under FLSA. This small group of workers has protection, and nobody else has any rights at work. This was fine back in 1938. But today, the work force has changed drastically. Back then the US was a manufacturing economy. Today, we are a service based economy, and there is a lot more white collar workers who have no rights.

In my opinion, FLSA is out of date. Our business laws need to be updated to reflect the current work force.

Let me explain to you why I care about this. I have seen a lot of young accounting students graduate college and get their first job. Now this job is a salary job based on 40 hours a week, but when they start working, they are forced to work 60 hours a week with no extra pay. This is not all firms, but there are some firms out there that take advantage of their employees. And I am sick of it. These kids have no rights under law to be able to say “this is not fair.”

There is no one standing up for these kids. Well I am standing up and saying, “you are being taken advantage of, and it is not right.” Most of these companies can afford to pay the overtime, or hire enough people to do the work. It is one thing if you have profit sharing in your company, because then if you work overtime, you are simply increasing the profits you share. But most white collar workers do not have profit sharing agreements. They are just working for free.

Now I know at this point, there are a lot of business owners and special interest groups that are screaming at me in anger through their computers saying “we cannot afford that.” Just hear me out. I have worked in a lot of accounting departments. Let me explain what happens at a practical level day to day. Let us say you have an employee who works eight hours. When that employee starts going into hours 9, 10, 11, and 12, their productivity starts to drop. They are less productive than they were the first eight hours of the day, by a lot. Not only that, when that same employee is working those overtime hours for free, they know they are not getting paid, and they start becoming bitter. So I just want to suggest that you probably are not getting the value you think you are, by making your employees work unpaid overtime.

I look at things from a big picture perspective. If you think about policy on the scale of the nation, forcing your workforce to work for free is not an effective way to structure an economy. In my opinion, FLSA needs to be updated to cover all employees, unless they have a profit sharing agreement. That means that everybody who works more than 40 hours a week has the right to be paid time and a half. It does not mean you cannot work more than 40 hours a week, you just will get paid for it. Now I know a lot of companies do a swap arrangement where they will give employees free vacation time in exchange for overtime hours. That is not the deal. If you agree to work for a company, you should get paid for that work with money. As a society, we should demand this.

Let me explain what this means on a personal level. 40 hours a week means you have time to have dinner with your family. It means you get to watch your kid play soccer. It means you get to volunteer at your local school. It means you have time to enjoy a hobby. It means you get quality time with your partner. The most valuable thing in life is time. We as business people need to stop robbing that time from employees. Most people want to work in a job they love, and be productive, but they do not want to work for free.

There are a lot of people out there right now running for president. None of them are talking about the 40 hour work week. But I cannot think of any other issue, that would cost the government $0 and have such a dramatic improvement in people’s quality of life. And it would be so easy to do. It would be easy to add an amendment to FLSA. Not only that, you would get broad support from people no matter what political party you are in. Just to give you a sense of this, in a related issue, in 2017 France recently passed a law giving employees the “right to disconnect” from email and other digital communication outside of normal working hours. Gallup did a poll in 2017 asking Americans if they favor a similar law in the US. 60% of Americans said they wanted that protection. (https://news.gallup.com/poll/1720/work-work-place.aspx) There is a growing feeling from American workers that they are being taken advantage of.

I am not against business owners here. I am trying to help you. Because if you keep taking advantage of your workers, they will unionize and force you to listen to them. Because that is what has happened throughout history. It is much easier on everybody if you do the right thing in the first place.

I want to go back to 1926. Henry Ford mandated a 40 hour work week in his car factories. We all know the success that Ford Motor Company became. What most people do not realize is he made this policy decision 12 years before FLSA. And he released a statement that said: “It is high time to rid ourselves of the notion that leisure for workmen is either lost time or a class privilege.” (https://www.cnbc.com/2017/05/03/how-the-8-hour-workday-changed-how-americans-work.html) He was not doing this for philanthropy. Henry Ford saw that this was a more productive way to run a society. When you had people with free time, they would buy more things, they would enjoy their life, and everyone would be better off. What we need today is more business owners to stand up and have their Henry Ford moment and stand up for a 40 hour work week.

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Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.

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