Before the New Overtime Rule Kicks In, Walmart Gives Managers a Raise


Daniel Wiessner and Nandita Bose report for Reuters:

Wal-Mart Stores Inc has raised salaries for entry-level managers before a rule change that extends mandatory overtime pay to more than 4 million U.S. workers, in an attempt to shield itself from unpredictable additional costs for salaried employees.

The raise was pretty significant—$45,000 per year to $48,500. And as Wiessner and Bose note, this decision wasn’t made out of the kindness of Walmart’s heart. (For those of you who flunked out of anatomy in college, here’s a tip: Walmart doesn’t have a heart because it’s not a living organism.) Walmart was simply ensuring that their managers were paid above the $47,500 threshold adopted by President Obama’s Department of Labor. That $3,500 raise might sound like a lot, but it’s probably peanuts compared to the overtime Walmart would have to pay its workers under the revised overtime threshold.

And that’s exactly how the overtime rule is supposed to work. The old threshold—an embarrassing $23,660 per year—was so pitifully low that a whole generation of Americans grew up thinking that overtime only existed for unionized employees and government workers. We need an overtime rule that ensures low-wage employers (and yes, even though Walmart pays more than the minimum wage now, I’d still count them as a low-wage employers) pay a living wage to their employees.

Note, too, that once Walmart raises their employees wages above the threshold, they can expect those employees to work over 40 hours a week without additional pay. That’s how it’s supposed to happen. The government isn’t taking away an employers’ ability to expect more work out of their employers, it’s simply asking employers to pay their employees fairly for the time they work.

But before we go crazy high-fiving Walmart for the good things they’ve done for their employees (fact check: Walmart is still not a living organism and so doesn’t have hands to high five) let’s acknowledge something. Walmart could have paid their employees this much before the overtime rule; this extra $3,500 per employee amounts to basically nothing when put up against the $14.7 billion annual profit the company turns.

Really what this proves is that the wages are not set by the almighty invisible hand of the market. Workers are not paid what they’re worth—employers pay their workers as little as they possibly can. This is why unions, where workers collectively barter for higher wages, are a great idea; individual negotiations generally aren’t as fruitful for the employees. These stronger regulations, in tandem with the $15 minimum wage, are providing some of the benefits once provided by unions.

The next time someone tells you workers shouldn’t be paid more than they’re “worth,” that the market sets wages through a simple mechanism of supply and demand, I want you to remember this story. Would Walmart have raised their managers’ pay by over three thousand dollars a year had the Obama Administration not proposed raising the overtime rule? That doesn’t seem likely to me.The invisible hand doesn’t exist. Workers aren’t paid what the market decides they’re worth—they’re paid what employers think they can get away with paying.


Paul Constant

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