Greece Could Exit the Euro. Why Does Europe Seem So Relaxed About It?
The European Union has spent roughly five years fighting to keep Greece inside its fold. So why, after so much effort, do its leaders seem ready to give up and let the Greeks tumble out of the eurozone?
Because they've stopped worrying and learned to love the idea of a Grexit. At least, some of them have. Here's how Der Spiegel explained the shift in January: Back during the bad days of 2012, officials in Berlin and Brussels believed in the "domino theory" of Greece. If it fell, the tremors would reverberate through the financial markets and potentially bring down troubled debtors like Italy, Portugal, and Spain. Today, their thinking has reversed. They've adopted "the 'chain theory,' which holds that the entire chain would become stronger were its weakest link to be eliminated,” the newspaper explained.
What changed? Compared with three years ago, the EU is in a much better position to fight a financial crisis in one of its members. First, it established a permanent bailout fund, the European Stability Mechanism. Perhaps more importantly, the European Central Bank has been engaging in a massive bond-buying program to try and revive the region's economy, which should have the side benefit of stopping problems in Greece from causing contagion elsewhere.
Not so long ago, it seemed plausible that if the Greeks left the euro, global investors would panic and start selling off Italian and Spanish bonds for fear that those countries might follow Athens' lead. That, in turn, would drive up their borrowing costs and cause their national finances to deteriorate, potentially requiring a rescue. But now the ECB, under the leadership of its president, Mario Draghi, is buying €60 billion of assets every month through its quantitative easing program in order to keep bond yields low. That's a giant reassurance to investors. And even if the markets did freak out, most observers expect that the ECB would step in to buy up however much debt was necessary to calm them.
“The perception, at least, is that the ECB will act if necessary to ensure there are no big dislocations in the rest of the eurozone,” Nick Gartside, chief investment officer for fixed income at JPMorgan Asset Management, told the Financial Times. “One thing we have learnt is never to doubt the creativity of the central bank.”
In other words, if a Grexit starts a brush fire in the financial world, Draghi is standing there with a giant extinguisher, ready to put it out.
That changes the cost-benefit analysis when it comes to keeping Greece in the monetary union. Since a Grexit probably won't cause an immediate crisis capable of unraveling the eurozone, Germany and the rest of Northern Europe are more concerned that giving into Athens' pleas for debt relief will set a bad precedent that will encourage left-wingers in countries like Spain to make similar requests. In short, instead of stopping a financial contagion, they're focused on stopping political contagion.
Not everyone in Europe subscribes 100 percent to the German view of things. France, Spain, and Italy have been more eager to strike a deal with Greece, perhaps in part because if investors do start worrying that other countries could one day be similarly nudged out of the euro, they're some the nations most likely to suffer.
For the Greeks, meanwhile, this should all seem sadly ironic. After all, it was Europe's tight monetary policy in the early days of the financial crisis that helped crater their economy and pushed the government into its standoff with creditors. Now, the ECB's looser approach could make it easier to push Greece out the door once and for all.
Finally, there is one nightmare situation for Germany in all this. If Greece leaves the euro, then thrives, it could encourage countries like Spain that have suffered greatly under EU austerity to leave, or at least demand softer treatment. In which case, the domino theory might prove to be true, after all.
Installing Solar Panels Is About to Get Easier for Lower- and Middle-Income Americans
Home solar panels tend to carry a whiff of luxury or granola, even as entrepreneurs and nonprofits prove that they can be affordable at every strata. The White House is about to boost these efforts to bring solar energy—and the smaller energy bills it can bring—to more lower- and middle-income Americans. On Tuesday, Democratic Rep. Elijah Cummings and Brian Deese, senior adviser for climate issues to the president, traveled to Baltimore to announce new efforts to place more solar panels in subsidized housing.
The New York Times reports that the administration “intends to triple the capacity of solar and other renewable energy systems it installs in federally subsidized housing by 2020, make it easier for homeowners to borrow money for solar improvements and start a nationwide program to help renters gain access to solar energy.” The White House also secured pledges of more than $520 million to fund other community solar farms and energy-efficient measures. Even though solar panel installation is exponentially growing, solar power currently accounts for just 1 percent of the United States' electricity.
The White House plan won't make a massive dent in that imbalance, but it could lighten some lower-income residents' utility bills. Cummings pointed to his constituents’ concerns about electricity costs: “The difference in a monthly bill of $10 or $15 means a lot to the people who live on my block.”
Until relatively recently, solar panels were considered an impossible expense for most families. As Slate’s Daniel Gross explains, while solar panels end up being cost-effective, they are slow to pay off and are an investment not too many can make. But in recent years as prices have dropped, more middle-income families are seeing panels as an affordable option.
What Will Happen to Greece If It Leaves the Euro?
With this weekend's big "no" vote in its bailout referendum, Greece has edged ever closer to finally leaving the eurozone. Its government is heading to Brussels today for last-ditch negotiations with European leaders over a new rescue package. But with a deal far from sure and time ticking away, a Grexit is starting to feel "more likely than not," as JPMorgan put it.
And what would happen then? If only we knew. Breaking up with the euro would almost certainly involve some nasty short-term suffering for Greece. But economists disagree about whether the pain might one day be worth the payoff. In one camp you have Nobel Prize winners Paul Krugman and Joseph Stiglitz, among others, who think that finally bidding goodbye to the common currency might actually be the country's best hope for reviving its depressed economy. In another, you have pessimists like the 246 economics professors from Greek universities who recently warned that doing so would lead to "disastrous economic, social, political and geopolitical consequences."
Since we lack an oracle to reveal what the future holds, I’ve outlined possible best- and worst-case scenarios for Greece in the event of a Grexit. But first, you might be wondering …
What if Greece doesn’t want to abandon the euro?
It might not have a choice. Greece can't technically be expelled from the eurozone. But it may have to bow out “voluntarily” if the European Central Bank cuts off the emergency loans that are now keeping the Greek banking system from collapsing. Were that to happen, Athens would need to start printing money in order to bail out its financial sector. Since Greece can't legally print euros, it would have to print new drachmas instead.
And we may well be approaching that endgame as Europe loses patience with Greece's left-wing government. After refusing to raise its current €89 billion ceiling on emergency lending over the weekend, the ECB took steps Monday that could theoretically make it more difficult for Greek banks to borrow, presumably to put more heat on Greece's negotiators. Should Athens default on a payment due to its European creditors later this month, it's plausible the central bank will close off the tap for good. It's also possible Greek banks will simply run out of cash in the coming days if the ECB just stands by and refuses to increase its cap on loans.
If Greece leaves, what's the best-case scenario?
Some argue that finally ditching the euro would be a blessing in disguise. The thinking goes like this: European policymaking—from its tight-fisted central banking philosophy to its demands for austerity—has acted like a vice crushing the Greek economy, and at this point, any deal that would keep the country in the euro would only prolong the misery. Leaving would be difficult, but liberating. Greece would default on its European debts and introduce a new currency. The new drachma would depreciate quickly, giving the economy a shot of adrenaline by helping Greek businesses sell more exports—who doesn’t love good cheap olive oil?—while luring more tourists to Santorini for affordable beach vacations. Yes, Greeks would see their bank accounts largely wiped out as their euro savings were converted into less valuable drachmas. And yes, prices of imported food, which Greeks rely on heavily, would rise. But there might be light at the end of the tunnel. As long as it's part of the euro, on the other hand, Greece's future is just a pitch-black slog with 25 percent unemployment.
"It’s becoming hard to see any path that doesn’t lead to Grexit," Krugman wrote recently. "It is also, although this is still something few want to accept, becoming increasingly obvious that Grexit is Greece’s best hope. Otherwise, where is recovery ever supposed to come from?"
Grexit enthusiasts, particularly Mark Weisbrot of the Center for Economic and Policy Research, often suggest that Greece could follow in the footsteps of Argentina, the poster child for surviving and even thriving after a massive default. In many ways, it's a seemingly tidy historical comparison. Much as Greece today finds itself stuck deep in debt with a depressed economy and a currency it can't control, during the 1990s Argentina tied its currency's value to the dollar, and later fell into a painful recession that forced it to accept a bailout from the International Monetary Fund in order to keep paying its creditors. But in 2001 and early 2002, the country changed course, defaulting on its loans and breaking the dollar peg, letting the peso fall in value.
The immediate aftermath was miserable—the economy crashed hard, leaving more than half the country's urban population in poverty. Food prices skyrocketed. Imported medications became scarce. There were street protests and riots. But while the upheaval was violent, it was also relatively brief. Aided by its cheaper currency, Argentina's economy recovered by 2005, which allowed the country to sit down with lenders and restructure its debts. From there it posted years of strong growth.
“It is worth noting that the social consequences of Argentina’s recovery were enormous,” Weisbrot wrote in 2012. “Even though the economy had a brief downturn during the world recession in 2009, employment in Argentina is at record levels. Poverty and extreme poverty have been reduced by two-thirds, and social spending has nearly tripled in real terms, since the default.”
Could Greece pull off a similar feat? Maybe so.
All that sounds pretty good. But what's the worst-case scenario?
Imagine all the riots, drug shortages, and widespread destitution, but without Argentina's happy ending.
As James Stewart outlined at the New York Times, there are a number of reasons to think that a Greek euro exit wouldn't work out quite so well as Argentina's adventure with default. Perhaps most important of all: Argentina is a major agricultural power that was lucky enough to start its recovery just as a massive commodities boom, fueled by China's insatiable appetite, was taking off. Argentina exported a lot of soy and corn, which had the twin benefits of boosting growth directly while bringing much-needed foreign exchange into the country at a time when it was difficult for Argentina to access international capital markets.
Greece, in contrast, is not a major exporter and may not be poised to become one, especially if it's forced out of the European Union and its trade pacts. Worse yet, as Stewart notes, its most important exports by far are refined petroleum products such as gasoline and diesel, which require imported crude to produce. Since oil is priced in dollars on the international market, a falling drachma wouldn't make Greek refiners much more competitive or profitable.
Meanwhile, it's no sure thing that a cheap currency will help much with tourism, especially if there are mass protests mobbing the streets due to a financial crisis. Tear gas has a way of scaring off vacationers.
Weisbrot argues that economists and journalists have overestimated the contribution that the worldwide commodity boom made to Argentina's recovery. The real reason the country began to grow so quickly after its crises, he believes, is that defaulting on its IMF debt and letting its currency float at market rates allowed the country to abandon austerity policies that were weighing it down, much as Greece is being suffocated today. But his theory has some notable critics, including Yanis Varoufakis, Greece's just-resigned firebrand finance minister, who called the idea that his country could "pull off an Argentina" "profoundly wrong."
Greece would have plenty of other issues to worry about aside from exports. Joseph Gagnon of the Peterson Institute for International Economics notes that Greek corporations and banks will still owe debts denominated in euros, which will become harder to pay as the drachma devalues, possibly leading to bankruptcies. Meanwhile, if the government decides to reverse the spending cuts it's made in recent years and run a deficit, it will likely have to finance it by printing money, which could lead to severe inflation. This is to say nothing of the more mundane but significant technical challenges of introducing a whole new currency, which is more complicated than simply breaking a peg. As University of California–Berkeley economist Barry Eichengreen wrote years ago while speculating about a potential breakup of the euro, “Computers will have to be reprogrammed. Vending machines will have to be modified. Payment machines will have to be serviced to prevent motorists from being trapped in subterranean parking garages.”
Then, of course, there's the question of Greece's debts to Europe, which won't necessarily disappear, even if the government stops paying them back. Economists Carmen Reinhart, of Harvard University's Kennedy School, told me that could make it difficult for Greece to find new buyers for its debt in the future. She and Christoph Trebesch, of the University of Munich, have found that in the wake of sovereign defaults, countries tend to start growing fairly quickly and regain their credit ratings—but typically only once they've restructured their old loans and resolved whether and how much they will repay their lenders.
“I don’t want to be like a wet rag, but I think the prospects of growth without resolution of the debt situation are very limited with and without a euro," Reinhart told me. "You’re not going to have potential new creditors lining up to make new loans to Greece when the rules of the game are just not known."
So if all goes wrong, Greece could end up with a plunging currency, frightening inflation, little to no engine driving its economy, a spate of corporate bankruptcies, and no access to credit. Its predicament now is dark. But is it worth risking that kind of economic affliction to break from Europe's yoke? I honestly don't know. Then again, it might not have any option but to find out.
Thomas Piketty Explains Why the Germans Are Being Massive Hypocrites About Greece’s Debt
Sure, Thomas Piketty comes up a lot in conversations about income inequality. But the man is good at putting economic issues into world-historical context and has some very strong opinions about the madness currently transpiring in Europe over Greece. In an interview with the German newspaper Die Zeit, translated on Medium by Gavin Schalliol, he explains why European Union demands that Greece pay back its debts in full are more than a little hypocritical, especially coming from Germany—the 20th-century poster child for debt forgiveness.
ZEIT: But shouldn’t they repay their debts?
Piketty: My book recounts the history of income and wealth, including that of nations. What struck me while I was writing is that Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War. However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.
ZEIT: But surely we can’t draw the conclusion that we can do no better today?
Piketty: When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.
Later in the interview, Piketty explains that there are two ways a country can get out from beneath an unbearable debt load. Either it can take the long, slow, painstaking route of paying back what it owes bit by bit, which Britain did after borrowing to battle Napoleon, or it can use a combination of inflation, taxes on private wealth, and a bit of debt relief, like postwar Germany and France.
Piketty: After the war ended in 1945, Germany’s debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP. Around the same time, France managed a similarly artful turnaround. We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece. Instead, both of our states employed the second method with the three components that I mentioned, including debt relief. Think about the London Debt Agreement of 1953, where 60% of German foreign debt was cancelled and its internal debts were restructured.
The whole interview is worth a read. Piketty argues that all of Europe needs to hold a conference in order to restructure its debts in a sustainable way—not just Greece's, but the entire region's. Fanciful? Maybe. But it'd almost certainly be more productive than what it's doing right now.
Whole Foods Is Sorry It Systematically Lied About Some of Its Prices
Whole Foods, you might recall, is in the middle of a drastic rebranding. It’s working to transition from “whole paycheck” to “values matter,” and just last month announced a new line of stores designed specifically for millennials. So while it’s turning around and all, Whole Foods would also like to apologize for some things it did wrong—specifically, for systematically overcharging customers.
Yes, that’s right. Last week, the New York City Department of Consumer Affairs said it was conducting an ongoing investigation into local Whole Foods stores after finding that the chain had “routinely overstated the weights of of its pre-packaged products.” That was true of meats, of seafood, of dairy, and of baked goods. Basically, nothing pre-packaged was safe. In all, the Department of Consumer Affairs tested 80 different types of pre-packaged products and found that each had some items with mislabeled weights. On top of that, “89 percent of the packages tested did not meet the federal standard for the maximum amount that an individual package can deviate from the actual weight,” the department reported. Hence “systematic problem.”
Needless to say, the Department of Consumer Affairs wasn’t too pleased with this, nor can we imagine customers were once they found out. It also wasn’t the first time Whole Foods had been accused of iffy pricing practices. Last summer, Whole Foods agreed to pay $800,000 in California to settle an investigation of “statewide pricing inaccuracy.” In that case, investigators said Whole Foods had routinely failed to deduct the weight of self-serve food containers at checkout, labeled pre-packaged items as heavier than they actually were, and sold items per piece that it was legally required to sell by the pound. In New York City, Whole Foods faces fines of between $950 and $1,700 per mislabeling violation, and the Department of Consumer Affairs says there could be thousands of them.
It seems unlikely that Whole Foods will be able to get out of some sort of monetary penalty for its pricing mishaps in New York. But if nothing else, the company’s executives want you, potential Whole Foods shopper, to know that they are really, truly sorry. “Straight up, we made some mistakes, and we want to own that and tell you what we’re doing about it,” Whole Foods co-CEO Walter Robb says in a video released Wednesday. That said, he and co-CEO John Mackey also want you to know that—really, truly—it was all a big misunderstanding. “We know they’re unintentional because the mistakes are both in the customer’s favor, and sometimes not in the customer’s favor,” Robb continues. “It’s understandable that sometimes mistakes are made. They’re inadvertent. They do happen. Because it’s a hands-on approach to bringing you the fresh food.”
Robb and Mackey say they’re going to beef up training in stores to avoid future mistakes, as well as implement a third-party auditing system. In 45 days, they’re going to report progress to customers. Whole Foods is also encouraging customers to ask at checkout if they think they’ve found a labeling mistake; if there is one that hurts the customer, they’ll get the item for free. And then at Whole Foods all will be well, and this entire incident will be forgotten. Because at Whole Foods, values matter.
Companies That Exploit Unpaid Interns Just Won a Huge Victory at Court
For a while, it seemed that unpaid internships were about to become relics of history. In 2013, a federal trial court judge in New York ruled that Fox Searchlight should have paid interns who worked on the production of its Oscar-winning film Black Swan, because they were indistinguishable from regular employees, tasked as they were with fetching coffee, taking phone calls, handling paperwork, and in one case apparently buying a non-allergenic pillow for director Darren Aronofsky. The decision helped usher in a wave of lawsuits by former interns against their employers in the media business. Companies including Condé Nast, NBC Universal, Viacom, and Warner Music eventually ponied up for settlements totaling millions of dollars.
Perhaps they should have waited a little longer before making a payout. Today, the U.S. Court of Appeals for the 2nd Circuit reversed the lower-court's decision in the Black Swan case, as well as a similar suit involving magazine publisher Hearst, essentially finding that unpaid internships can be legal if they're educational enough. Should the ruling stand, it may be all but impossible for former interns to sue their ex-bosses in the future.
In his 2013 opinion, Judge William Pauley III found that Fox Searchlights interns should have been considered employees under federal law and were entitled to at least the minimum wage. In doing so, he relied on a six-part test advocated by the Department of Labor, which says that workers are owed a paycheck if their employer gets an "immediate advantage" from their labor (that includes, presumably, convenient access to caffeine and luxury bedding).
But according to today's decision, Pauley's approach was too strict. The 2nd Circuit ruled that interns could go unpaid so long as a job benefited them more as a learning experience than it benefits their employer financially. To decide whether that is the case, it wrote that courts should balance a long, open-ended list of considerations like whether interns received training similar to an academic program, whether they might get academic credit, and whether their work “complements, rather than displaces, the work of paid employees.”
This is all quite a bit fuzzy. "Applying these considerations requires weighing and balancing all of the circumstances,” the court wrote. “No one factor is dispositive and every factor need not point in the same direction for the court to conclude that the intern is not an employee entitled to the minimum wage.” But fuzziness is also the point. The court writes that determining whether an intern must be paid is “a highly individualized inquiry.”
That's very, very bad news for any former interns considering suing their former companies for back pay. In the second part of its decision, the 2nd Circuit finds that Judge Pauley had incorrectly allowed a class action suit to press forward on behalf of everyone who interned at Fox Entertainment between 2005 and 2010. How come? All of those interns don't have enough in common to join together in a single lawsuit. Instead, their claims need to be litigated more or less one by one—meaning that, more likely than not, they won't be litigated at all. Lawyers have been happy to take these intern lawsuits on as potential class actions, because they can win a potentially large judgment or settlement by pooling lots of small claims together. But as the Hollywood Reporter's Eriq Gardner notes, most former interns could never win enough money in a solo lawsuit to make the case worth an attorney's time.
From the news reports so far, it seems unclear whether the plaintiffs plan to appeal this decision. And so far, their lawyers are putting a happy face on it. The suits are headed back to the lower court, which could still find that the interns should have been paid using the new test.* Per Reuters:
Rachel Bien, the lawyer who represents the former interns in both cases, said she was pleased the court created a clear rule.
"Many of the most abusive internships involving low-level tasks and grunt-type work are plainly illegal under this standard," she said.
But by killing the potential for large class actions against companies over their internship programs, the 2nd Circuit is effectively giving them leeway for abuse. It's possible that media companies have been so scarred by this last round of court cases that they'll shy away from the worst practices of the past. But if they really want to go back to offering 22- and 23-year-olds unpaid "educational opportunities" that consist mostly of grabbing Starbucks and making photocopies, it doesn't look like there will be much to stop them.
*Update, July 2, 4:37 p.m.: This story has been updated to note that the suits were remanded to the lower court.
Today’s Jobs Report: Cloudy With a Chance of Labor Market Slack
Here is the reason to be somewhat happy with today's jobs report: In June, U.S. employers added 223,000 workers to their payrolls, according to the Bureau of Labor Statistics. Since the beginning of 2013, the U.S. country has added, according to my trusty Excel spreadsheet, exactly 223,000 jobs per month on average. It's not often that you have a perfectly average month. This is like the harvest moon of economic reports.
Also, the unemployment rate fell to 5.3 percent, from 5.5 percent.
Here are the reasons to be less happy with today's jobs report: pretty much everything else. The labor-force participation rate suddenly dropped to a new post-recession low of 62.6 percent, after holding more or less steady for roughly a year. (That's part of why the unemployment rate fell—a smaller fraction of people in the job market.) The last time participation was this low was 1977, when women were still entering the workforce.
Meanwhile, hourly wages didn't increase at all from May to June and the BLS lowered its estimates of job growth in April and May.
Upshot: The economy is still adding jobs at a reasonable pace (thankfully), but the labor market otherwise looked a bit tepid last month. It seems like evidence that there's plenty of slack for it to keep adding new workers before inflation becomes any kind of a serious concern, which gives the Federal Reserve all the more reason to hold off on hiking interest rates this year. So, in other good news, you might have a bit longer to get a cheap mortgage. There's always a silver lining.
One Industry That Will Hate Obama’s New Overtime Rules: The Media
Today the Obama administration officially proposed new regulations that it says will entitle at least 4.6 million additional Americans to overtime pay. On the whole, it seems like a reasonable move that may encourage businesses to hire more workers rather than milk employees for all the uncompensated labor they can get away with.
But, man, let me tell you—this is going to make life difficult for your favorite magazines and websites.
Under the rule change, most salaried employees who earn less the $50,440 per year will automatically be eligible for time-and-a-half pay when they work more than 40 hours in a week. Currently, the cutoff is just $23,660, after which workers can be exempt from overtime requirements if they're considered management or a professional.
Why the need for such a big jump? Labor activists and progressives argue that today's overtime threshold lends itself to all sorts of abuses by employers, who find tricky ways to categorize low-salary workers as supervisors in order to get out of paying them for all their hours. This happens, partly, because the rules about who counts as a manager are murky at best. At a big box store, for instance, somebody might be called a supervisor if she spends a part of each day coordinating her colleagues' schedules, even though she spends the vast majority of her time behind a cash register or stocking shelves.
“Because you have these regulations that are so fuzzy, we basically have this whole group of people who are faux-managers and faux-supervisors," Judy Conti, the National Employment Law Project's federal advocacy coordinator, told me. "They have to work for $30,000 a year, and 60 hours a week, and they end up making less per hour than the people they purportedly supervise, because they have to work all of these hours uncompensated.”
Raising the bar on exemptions to $50,440 should eliminate that problem by ensuring that low-pay workers who don't have much on-the-job bargaining power qualify for overtime no matter what creative job description their employer concocts for them. (Hourly workers, typically, are overtime-eligible no matter what they make.) It also brings the threshold exactly back to where it would have been had the government adjusted it for inflation every year since 1975, when it covered 65 percent of salaried employees, as opposed to the mere 11 percent who fall under it today. The sorts of jobs affected include a lot of typically lower-middle-class occupations in retail, fast-food, and customer service, as well as white-collar office workers like some insurance agents and paralegals.1
How exactly the rule change will affect those workers is a bit unclear, though there are reasons to think it'll be a net benefit. Of course, businesses could simply choose to pay their employees more. But more likely, they'll find other ways to adjust. For starters, they might lower base pay for some jobs that they expect to involve more overtime. They might also choose to hire more workers and ask them to work fewer hours. The National Retail Federation, which leans extremely conservative on labor issues, warns that “while the total number of workers employed by these industries would likely grow, the quality of these jobs would diminish: they would be low-paying and often part-time, and many workers currently in lower-level professional and managerial jobs would find their status jeopardized.” Those concerns seem a bit exaggerated, however. Equally likely, many part-time employees who want more hours may get bumped up to full time while their underpaid, overworked "bosses" get some time off.
That said, there will be trade-offs. There is probably at least one aspiring restaurant manager at your local Chipotle who would be happy to pull a slightly longer shift without extra pay for the sake of a promotion. The Department of Labor's proposal will make that a lot harder to do.
Then there are the creative industries, which are singularly ill-suited to deal with these rules. I'm going to use journalism as an example here, because I know it. But you could sub in other businesses at will.
As you're probably aware, large swaths of the publishing world run on the energy of ambitious, educated, and badly underpaid young people, who are willing—and often content—to work long hours for the sake of being read, and potentially noticed by editors elsewhere who will one day hire them for more money. There are a few problems with subjecting those eager twentysomethings to overtime rules.
First, the government isn't necessarily protecting them from exploitation. While journalism and other creative fields have been guilty of some indefensible labor practices—hello, unpaid internships— advancing in them requires building a body of work over time that will impress future employers. Sometimes that requires a bit more than 40 hours a week of effort.
Writers are also idiosyncratic. Some spend hours neurotically finessing their articles. Some happily knock out eight posts in a day. That makes it hard to guess how long any one job should require in media—it depends too much on the person filling it. And if you can't quite predict how long your next staffer will need to do their work, you can't really lower their base pay in order to account for the overtime you'll theoretically have to shell out because someone decided to spend a few late nights crafting the great American think piece. As an alternative, publications could issue a blanket rule against working more than 40 hours, but then, the Internet would probably have about two-thirds the news you enjoy today, and the meager profits we earn by tricking you into glancing at ads would dwindle further. As for hiring more bodies, again, budgets are a bit tight.
Finally, it's sometimes really, really hard to define what counts as work in this business. When I'm reading the Upshot or the Wall Street Journal in the afternoon, am I just zoning out, or am I keeping abreast of the competition? It's tough to say. What about the hours I spend tweeting? Am I goofing off, or am I promoting my personal brand? Probably a bit of both, but labor law doesn't countenance those sorts of ambiguities.
To be sure, there are some news organizations that do pay overtime. But for a lot of the industry, it would be an untenable norm. And the overarching point here is that, while overtime functions pretty well when it's used to discourage companies from working vulnerable employees in low-skill positions to the bone, it's not necessarily appropriate in creative industries where educated young people are out to make a name for themselves and margins are thin.
That's one reason why the Department of Labor already offers an overtime exemption for creative professionals (interestingly, it doesn't cover journalists in all circumstances, but let's not digress). But it looks like under the Department of Labor's new rule, it won't be applicable to anybody earning under $50,440. My guess is that this will result in two things: First, lots of publications will simply ignore the overtime rules, partly with the implicit consent of their employees. Second, there will probably be some lawsuits by people who decide, ex post facto, that they were forced to work extended hours without being properly compensated.
One solution might be to keep overtime rules looser for creative types. But there's a chance that might open up loopholes that would help companies cheat other workers out of their overtime. “I am sure there are some industries that are going to be more challenged by this than others," Conti told me. “At the same time, the law was put in place so that people can’t work abusively long hours for abusively low pay.”
Even if some of us might want to.
1In case you're wondering, doctors, lawyers, and educators are also exempt from overtime rules, meaning medical residents, public defenders, and your kid's third-grade teacher aren't suddenly going to be earning extra pay.
Nobody Has Any Idea What’s Going On With Greece Right Now
As of Monday, it seemed as if the Greek crisis was finally hurtling toward a conclusion, or at least a meaningful inflection point. With its bailout deal expiring and negotiations for an extension logjammed, the government in Athens had called a national referendum for July 5 on whether it should accept the austerity plan its European lenders had demanded in return for a new rescue package. A "yes" vote, and Greece would get another round of loans to pay its existing debts but would be doomed to keep slogging through the depression that has left unemployment above 25 percent. A "no" vote, and European leaders insist Greece would be forced to leave the eurozone, with potentially calamitous consequences, at least in the near term.
Today, that choice is a bit less clear-cut. According to Bloomberg, German Finance Minister Wolfgang Schäuble has told lawmakers behind closed doors that "Greece would stay in the euro for the time being" even if its people vote "no" in the referendum. Should that come to pass, he added, Greece "may be able tap about 32 billion euros ($36 billion) in European Union support funding to boost its economy."
Given that Germany is by far the most important of Greece's creditors, Schäuble's reported comments strongly suggest that this weekend's vote might not resolve anything. Even if Greeks say no to Europe's last offer, negotiations could continue. And the fact that this information is leaking probably makes it a bit more likely that the Greek people will in fact vote "no."
Theoretically, there is still at least one hard deadline lying ahead for Greece. On July 20, the country owes the European Central Bank 3.5 billion euro. If it misses that payment, the ECB could be forced to cut off the emergency lending that has kept Greece's banks from imploding, a move that would almost certainly set a Grexit in motion. Then again, if there is yet another pot of money available to Greece as Schäuble seems to be hinting, it’s not altogether clear that date means anything, either.
"But wait!" you may be thinking. "Didn't I just read on Slate.com that Greece is already about to default on its debts." Well, yes, some of them. It looks like the country will miss a $1.7 billion payment to the International Monetary Fund. But while that means Greece likely won't be able to receive further loans from the group, it doesn't have much bearing on its ability to stay in the euro. So, talks continue on.
In short, nobody has any damn idea what's going on with Greece.
Disney Theme Parks Bring the Tyranny, Danger of Selfie Sticks to an End
In a win for selfie stick–fearing tourists everywhere, Disney said Friday that it is banning the device from its theme parks. Lately, the gadgets had “become a growing safety concern for both our guests and cast,” a Disney spokeswoman explained to CNN Money. Disney had already banned selfie sticks on rides but was reportedly still struggling with rogue park-goers who would sneak their devices on board and then whip them out, sometimes causing the ride to grind to a halt.
The ban is scheduled to take effect at Disney’s U.S. theme parks on Tuesday, and to be implemented at Disneyland Paris and Hong Kong on July 1. Going forward, visitors attempting to bring selfie sticks into a Disney park will be asked to check them at the main entrance. Behave yourselves, people!
Does this spell the final doom for our cultural obsession with snapshots, with selfies, with moments? Disney isn’t the first to ask patrons to lower their selfie sticks. The Smithsonian and the Metropolitan Museum of Art imposed similar bans earlier this year. Who knows what other institutions might be next? In the meantime, we’ll file this one away as another victory for consumer safety. Between that and the recall of Lululemon’s face-attacking draw strings, it’s been a big week.