Work Is Changing, Employment Regulation Needs to Change Too

For many people, the 9 to 5, office- or factory-based, corporate job that Dolly Parton lamented in the 1980s is a thing of the past. Thanks to revolutions in the way businesses operate and the costs of economic transactions, those workers now have flexible working hours, the ability to telecommute, or even to be their own boss. The dreams of a better life Dolly sang about are with reach for many. Yet government regulators using 1930s labor law threaten those advances.

In my piece at Investors Business Daily about my new report “Punching the Clock on a Smartphone App?” I note the potentially devastating effect of the deluge of new regulations surrounding work on the new economy:

The Department of Labors proposed overtime rule is a case in point. Since the last time the agency significantly raised the wage threshold for its overtime requirement, businesses have developed new practices to give ambitious junior managers the chance to prove themselves by, yes, working longer hours, but also by giving them more responsibility. In franchise businesses, these are often the people who become managers, then owners.

Under the new overtime rule, these aspirational people will no longer be able to work longer hours in many cases and thus miss out on a chance to prove themselves. Managers will have to closely watch hours worked, probably with automated assistance, and may even require some former telecommuters to start showing up physically at work. The Labor Department admits that most people wont see much difference in their paychecks as a result of the rule. Its all about the department controlling hours worked.

The problem is a collision between two opposing forces – the new economic force of lowered transaction costs that makes it easier to work in new ways and 1930s labor laws that are based on the principle that all jobs must be subject to employment regulation suited to the days of big corporations and big unions.

As I say in my Q&A on Forbes with the Manhattan Institute’s Jared Meyer, the economic force is one that fits with Dolly Parton’s point that, “There’s a better life, and you dream about it, don’t you?”

In some ways we are returning to the fundamental nature of human market interaction, which involves people bargaining freely with each other as equals. This is what Adam Smith called “the system of natural liberty.” Transaction cost efficiencies shifted much of work from the marketplace into employment during the industrial revolution and afterwards, but people, especially in free societies, have always bridled at what employment implies in terms of giving up natural liberty…

Of course, there is an implicit contradiction between this world, where lower transaction costs and entrepreneurial aspirations are taking us, and the highly-regulated world of employment that the Obama administration wants. This could be the major policy fight of the next decade.

If we don’t want to give up those dreams, then employment regulation needs to change. You can read more about my recommendations for change in the Q&A or more extensively in the report. And you can listen to Dolly sing the song here.