Reply To: overtime exemption


In a market economy there would be diversity of contractual terms across different occupations. Entrepreneurs would adopt the method of contracting that generated the greatest benefits. Every compensation system from piece rate to hourly to salary and from wages to benefits to profit sharing would exist in the economy, each one in the appropriate occupation. Here is a NBER article on the decline of piece rate pay, which the authors attribute to the rise of team production:

State intervention can introduce inefficiencies in the pattern of contracting methods. One example is entrepreneurs shifting from wages to paid health care insurance in the wake of the federal government divergent tax treatment of the two imposed during wage and price controls of the Second World War.

One example of government intervention that could affect the balance between hourly and salary compensation is the Federal Labor Standards Act which mandates minimum wages and overtime for hourly workers. Some entrepreneurs and their workers might find it advantageous to have salary contracts, and longer working days, to avoid hourly compensation levels above the workers productivity.