Bernie Sandersthe senator from Vermont, recently proposed new legislation that would change federal rules on overtime. The new law, if passed, would require employers to pay a minimum of 1.5 hours of overtime for each hour worked beyond the 32-hour week. Currently, overtime starts at 40 hours per week. The requirement would be phased in over a few years.
Sounds great. Who wouldn’t want that? There’s only one problem: someone has to pay for it. For businessmen, this is not an ideological argument. It’s mathematics.
Let’s say a company employs 100 people. And, for the sake of argument, let’s assume that each employee earns $50,000 a year for a 40-hour work week. Assuming 50 work weeks, that works out to about $1,000 per week or $25 per hour.
Under Sanders’ proposal, the employee would earn $25 an hour for the first 32 hours and then be paid time and a half overtime, or $37.50 for the additional eight hours to make it a 40-hour workweek. Which means that for a full week the employer now pays $1,100 per week or $55,000 per year for 50 weeks. That’s $5,000 more for each employee.
And it’s actually more than that. You have to add the federal and state taxes that an employer pays: about 7% of salaries, which adds $350 more per year. A small business that employs 25 people would be paying an additional $133,750 a year under Sanders’ proposal. If they had 50 employees, it would be an additional cost of $267,500 per year. Well, you can do the math from there.
And I don’t include other benefits (retirement plan contributions, workers’ compensation, etc.) which are generally calculated as a percentage of wages. These costs would also increase.
Of course, the company does not have to pay for a 40-hour week. They can limit the work week to 32 hours. But with unemployment and available jobs at historically low levels, I find very few companies that can do this. They can’t find enough employees to do the job they have.
No company wants to be forced to pay more for fewer hours. Until now, many business owners have been dabbling in AI. But the owner of a 50-person company would be happy to spend $100,000 on an AI project to save $267,500 a year. Sanders wants a moratorium on AI development. But now he is proposing a law that would give employers another financial incentive to automate. The CEOs of Microsoft, Google, Anthropic and OpenAI must love this.
I think the solution is to accept that the workplace has changed. Today’s workers value compensation in different ways.
It is not just an hourly wage or a weekly wage. Recent research suggests that additional time off may have psychological benefits that a cash equivalent bonus does not provide. According to a recent study in Journal of Management Psychologymost employees preferred more time off rather than additional compensation. The researchers found that “a vacation time benefit gave surveyed employees an internalized sense of being treated and valued as full human beings.”
Of course, it is important that we are paid a living wage. But many workers, particularly those in the younger generations who make up more than half of today’s workforce, want something equally important: balance. They want flexibility. They want to spend more time with their families, traveling, relaxing and pursuing their own personal interests.
It would make more sense to offer incentives (not require) employers to provide more paid time off, dependent care leave, and sick and personal days. The government already provides tax credits to employers for providing family leave and other benefits to reimburse dependent care expenses. This is also a valuable form of compensation and one that more accurately addresses the issues facing today’s employees.
That’s why a 32-hour or four-day work week is not a bad concept. The government can help, but ultimately it is employers who must step up.
A four-day work week can be accommodated through better scheduling. I know nurses, veterinarians, and healthcare and construction workers who work at companies that offer their employees to work four 10-hour days and take three days off. They love it. Of course, some jobs may not fit that schedule, and other paid time off plans should be considered for those workers. But if an employer invests time in coming up with a strategy that allows their employees to come to work just four days a week (while still meeting their job requirements), they will have an easier time attracting and retaining talent.