Overtime work is a mainstay of the U.S. economy and provides valuable flexibility for firms.[1] Unfortunately, the flexibility is not balanced.  Federal law dictates that workers must receive more monetary payment (“time and one-half”) for overtime, but may not choose to be compensated by time off (of the same value, “time and one-half”) when they need it.  The law should be changed so that workers can manage the hours in their lives more flexibly, just as employers can use overtime for the same purpose.

High unemployment may mean that Americans are not getting the opportunity to work as much as they would like, but they are willing to work a lot.  Indeed, many workers choose to work beyond their usual hours.  In the April jobs report, the Department of Labor indicated that there were an average of 3.3 hours of weekly overtime worked in durable goods manufacturing, and 3.4 hours in non-durable manufacturing.

Under current law, overtime work means overtime pay – 1½ times the normal rate.   A worker making $10 normally picks up $15 for the overtime hour.  Cash is good, but it might be even more valuable for the worker to have an extra hour off to go to the doctor, have a parent-teacher conference, or otherwise manage the demands of modern life.

The data suggest that there may be widespread value of this sort.  Using American Time Use Survey allows one to look at the demands of the time of the American worker.[2]  For this purpose, define an overtime worker as one who works more than 40 hours in a week.[3]  Using that definition, the data indicate that more than 45 percent of men and more than 20 percent of females work overtime.  (See Table.)  Nearly 20 percent of the poor work overtime.

Clearly, overtime work is an important facet of life in the labor force.  But it spills over to other aspects of life as well. More than 36 percent of those with children end up working overtime, raising the degree of difficulty in juggling work and parenting.

More than one-quarter of those in poor health work overtime as well.[4]  And parents and those struggling with their health are often doing so alone; 31 percent of those married but without a spouse present (divorced, widowed, etc.) are working overtime. 

In sum, the data show the potential for great value from more flexibility in using compensatory time off (“comp time”) in exchange for overtime instead of the fixed rule of monetary payment.  Indeed, there are three powerful reasons for considering changing federal law:

1. It is a big deal.  Overtime work is a large aspect of the labor market landscape and those working overtime have the characteristics of individuals who would benefit from some flexibility in their work hours.
2. Nobody loses.  Changing the law to let employers and employees agree to allow comp time instead of overtime permits the rules to best fit the situation.  If an individual wants overtime pay, nothing – payroll or hours – changes.  If comp time is important, then the employer’s costs are unchanged and the workers are benefitted by the flexibility. 
3. Fairness.  Oddly enough, the one place where the option of comp time is the law of the land is the government.  Why should state and local employees have options that are banned for the workers who pay their salaries?

Notes