Dive Brief:
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Wal-Mart recently raised the salaries of its entry-level managers ahead of a federal overtime rule change that will require overtime pay to salaried workers earning less than $47,500 a year, an amount double the current threshold of $23,660, Reuters reports.
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In September, the retailer raised annual salaries from $45,000 to $48,500 for employees, including store management, but did not say how many employees the change will affect, Reuters reports.
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Wal-Mart spokesperson Randy Hargrove told Reuters,"We think the starting rate of $48,500 a year ... would make a lot of business sense for our company." The new overtime regulation takes effect Dec. 1, according to the U.S. Department of Labor.
Dive Insight:
President Barack Obama’s change to the overtime rule, an effort to shrink the enduring wage gap that has helped limit the benefits of the economic recovery, was announced last year. Retailers and trade associations, such as the NRF have since complained that the significant bump is too much too soon. The retail industry is likely to be among businesses most affected by the change, considering the sector is the largest private employer in the country and supplies about 42 million jobs, according to the NRF.
Economist Jared Bernstein, who served in Vice President Joe Biden’s office before leaving to join the Center on Budget and Policy Priorities, published a paper in 2014, which was widely considered to have influenced the President’s decision. In it, he argued that lower-salaried workers have been forced to forgo both time and spending power as their work duties impinged on their time without adequate compensation.
“[We are concerned that the breadth of the ‘duties tests’ of today’s OT rules exempts too many salaried white collar workers who, because of the routine nature of their work, their low pay and the lack of control they have over their time and tasks, should be covered by the act and entitled to OT pay and other [Fair Labor Standards Act] protections, such as the minimum wage,” Bernstein and his co-author, Ross Eisenbrey, wrote. "In addition, we suspect that millions of employees who are not exempt and who are entitled to overtime pay do not know it because the law and regulations are so opaque.”
Bernstein and Eisenbrey proposed then that raising the salary threshold would be a simple and effective way to protect those workers. In September, officials from 21 U.S. states filed a lawsuit, arguing that the new regulation places too heavy a burden on states’ budgets. Business groups have also filed suit, arguing that employers will be forced to change management jobs to hourly ones and create more part-time jobs without benefits.
Given the move, Wal-Mart has instead chosen to raise salaries above the threshold, which will allow them to continue to require overtime without added pay. For retailers, wages and salaries present a double-edged sword: While labor costs are retail’s number one expense, consumer spending has been hurt by wages that fail to keep up with the rising cost of living.