IP: If you work at a California company, look out (AB60)

[Dave Farber <farber () cis upenn edu>]

> From: Declan McCullagh <declan () well com>
> Subject: FC: If you work at a California company, look out (AB60)
>
>
> The governor of California is about to sign a particularly pernicious bill
> into law. It says companies must pay their employees overtime if they work
> more than an eight-hour work day. 
>
> Obviously anyone of good conscience wants everyone to be well off as
> possible. The question is, though, how best to do it?
>
> This soon-to-be-law's counterproductive effect: Less efficient companies or
> startups already teetering on the edge of cashflow sufficiency will go out
> of business. To take this a step further, we'll have higher production
> costs in the near term, which means higher prices, which means people can
> buy fewer California products with the same paycheck.
>
> In the long term? Firms have hired the number of employees necessary to
> complete a certain amount of work. In the long run, employees could simply
> be given a reduced salary so their inflated overtime wages will roughly
> equal their old. (Actually depending on salary, the law may restrict this.)
>
> It means reduced privacy for individuals (though I don't see any privacy
> groups complaining). California firms covered by the law will be required
> to track their employees' behavior and put in a kind of time clock system
> with additional record-keeping and monitoring of workers. The additional
> staff-hours required to record time worked will also cost the firm more.
>
> It puts California firms at a competitive disadvantage compared to
> companies located in other states or other countries. In no case will this
> law reduce California companies' costs; it can only increase them and give
> a nice boost to firms in Seattle or Boston. Again, marginal companies who
> could barely survive before are history.
>
> It could reduce investment in California companies and cause would-be
> entrepreneurs to launch their firms elsewhere. Why go through the headaches
> of dealing with this bureaucratic nonsense when other jurisdictions are
> happy to be home to the next yahoo.com? California's tax base would be
> affected.
>
> It goes against the history of tech startups, where someone may be paid a
> pittance but rewarded with fat stock options. Companies can no longer
> employ, say, 100 people at $30,000 a year and expect 80 hours a week at the
> same salary. They can't cut wages in half and hire twice as many 40-hr/wk
> people because (based on my reading of the law) it sets a fairly high
> minimum-wage floor for salaried employees. If you have just $3 million in
> venture capital and you need those 80-hour workweeks, your company may not
> exist. Oops.
>
> The Industrial Welfare Commission (bureaucrats really are 50s relics,
> aren't they?) will decide what firms are affected or not. This would be a
> perfect opportunity -- I'm not saying it will happen, just that it could
> happen -- for well-connected lobbyists to try to screw over their
> competitors by immunizing themselves at the expense of their rivals. Will
> computer engineers be exempt but not software engineers? Who decides this?
> (Talk about a perfect catalyst for lawsuits...)
>
> It's not that California politicos are malicious; they may even be
> well-intentioned. But they clearly don't look at the long-term consequences
> of their favorite pieces of legislation. If they did, they'd see that if
> their goal really was to boost wages, they could just go ahead and cut
> taxes. But instead they're happy pandering to the economically-illiterate.
>
> The text of the bill:
>
> http://www.leginfo.ca.gov/pub/bill/asm/ab_0051-0100/ab_60_bill_19990708_enro
> lled.html
>
> A Wired News story on the bill:
>
> http://www.wired.com/news/news/politics/story/20692.html
>
> -Declan
>
>
>
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