(This article was originally published at Big Data, Plainly Spoken (aka Numbers Rule Your World), and syndicated at StatsBlogs.)
In any discussion of ethics , someone is bound to bring up the law: it is okay to do something if something is not against the law. The logical conclusion of this belief is that ethics is irrelevant in the presence of the law.
The recent stories relating to minimum wage and the overtime pay rule changes (for example, link) argue strongly against such a point of view. The law has stipulated that non-managerial (i.e. lower-wage) workers must be paid 1.5 times salary for any overtime work. The Obama administration has now raised the maximum salary to be considered non-managerial from ~$24,000 to ~$48,000. This reportedly will raise wages by $1.2 billion annually.
This rule change is designed to combat gaming of the existing rule. Employers avoid paying overtime by just paying employees above the $24,000 threshold and calling them "managers" even though they aren't managing anyone or anything. If you have to pay someone 10 hours overtime per week at $24,000 base salary (i.e. $12 hourly @ 50 weeks a year, 40 hours a week), that means paying an extra $180 per week, or $9000 annually. So the employer saves up to $8000 by paying this employee $25,000 and calling the position a "manager".
The new rule changes the numbers/thresholds but keep the structure in place. It will just lead to another round of gaming.
According to the article, some employers are already scheduling meetings with employees to change their compensation packages. It's clear that some employers will elect to hire more part-time help, and others may just adjust base pay, and still others will find ways to nullify the revised rule. Fundamentally, the allocation of profits between the employees is a zero-sum game. Whatever is paid to workers is not paid to corporate management.
The other issue is one-size-fits-all. It's surprising that this wage level does not vary with geography or industry. There is a practical problem here. Pay levels are not publicly available so it is hard to create granular rules, much less to monitor them.
This takes us back to ethics. I don't believe that purely legal approaches will solve the problem of fair pay for workers. Fairness is pitted against self-interest/greed. One positive result of the rule revision is to generate discussion around this topic. Any discussion should include ethical considerations.
The same kind of gaming rules affects many predictive models. The Google Pagerank algorithm is a way to estimate the "importance" of any given webpage. It is quite a powerful scoring mechanism because most people reportedly do not scroll past a few pages of results. Thus, there is a "land grab" for the first-page real estate on Google and other search engines. An entire cottage industry known as SEO/SEM has arisen, which promotes a bag of tricks to game the algorithm. Even though Google does not disclose the full details of the algorithm, this doesn't stop gaming because you can reverse-engineer the algorithm to a certain extent. The gaming defeats the original intention of Pagerank which is to surface the most relevant content for users. More rules lead to more gaming but more discussion of ethics will help.
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