"... Whether or not this increase can be imputed to the detaxation of overtime is a question that will have to be sorted out by econometricians... "
At a time when the economy is anemic,
can you think of another cause for it ?...
Indeed, the question in itself is almost funny. Of course the detaxation has effects.
To which I respond, Gentlemen, you are too easily satisfied. The problem with the government's good news is that it is too good. The economy has indeed been "anemic," with growth in aggregate demand around 2 percent, if that, so what could account for a 40 percent jump in overtime? The theory of the detaxation was that growth was inhibited by supply-side restrictions in the labor market. It was too expensive for an employer to offer additional hours of labor to meet increased demand, so the solution was to reduce the expense. But there has been no increased output. So if more overtime hours have been added, it is plausible to think that firms have decided to meet existing demand with fewer workers working longer hours, which is now an economically viable alternative. Indeed, this was one of the predicted possible consequences of the detaxation proposal. The contention is not about whether "detaxation has effects." The question is whether those effects are benign or perverse (that is, is overtime being substituted for additional employment). So I reiterate: the proof has yet to be given. The sheer number, 40 percent, even if accurate, doesn't tell us what we want to know, and the claim that it does is sheer ideology, because, after all, the actual goal of detaxation is not to increase overtime hours but to increase output.
Of course it is perfectly possible that the workers earning overtime wages will increase demand in subsequent quarters by spending their earnings. But that is a separate issue from the question of whether supply-side rigidities were responsible for a suboptimal allocation of resources given current demand.