Poor, poor retailers. Sen. Patty Murray, D-Washington and head of the Senate Health, Education, Labor, and Pensions Committee, is one legislator backing the White House’s plan to make overtime pay available to more salaried workers — a move vehemently opposed by the nation’s largest retail group.
Currently, workers who earn a salary greater than $23,700 can’t receive overtime pay if they work more than 40 hours in a week. Under Obama’s plan, that threshold would rise to $50,400, and Murray thinks it’s a great idea.
“It would mean a lot of money in people’s pockets, and what it basically means is you’re going to get paid for the work that you do,” Murray told a McClatchy reporter.
The National Retail Federation, on the other hand, thinks there’s plenty of money in people’s pockets. In a press release denouncing President Barack Obama’s plan, the organization’s senior vice president of government relations, David French, said it would hinder employees’ ability to climb the ranks within companies.
“The net result of these changes would be an accelerated hollowing out of middle-level management, making it much more difficult for hourly workers to rise into the professional ranks,” French said in the statement. “We expect companies would encounter difficulties developing talent and promoting internally due to the narrower pipeline of talent resulting from these changes.”
Furthermore, French told McClatchy, “There simply isn’t any magic pot of money that lets employers pay more just because the government says so.”
Actually, there are pots — operating income and cash reserves. To be fair, most retailers operate on razor-thin margins, but the assumption that Amazon.com, Wal-Mart, or Macy’s has no money to pay mid-level employees overtime is absurd. Slight price increases industry-wide could cover the cost, or companies could simply divert more of their profits to employee salaries.
This isn’t a recipe for disaster for retailers. Case in point: Costco. The Issaquah retailer has long paid its workers a livable wage, and — contrary to the NRF’s claims — there’s a clear path of advancement within the company. Bottom-rung Costco workers earn $11.50 an hour, and the average hourly pay is $22. Wall Street has long called for Costco to cut pay, and Costco has always resisted.
“It starts with a living wage and affordable quality health benefits,” Costco CFO Richard Galanti told Fortune. “That’s the initial basis for engagement.”
Costco has plenty of middle-class employees who are happy at the company and remain long enough to climb the ranks, but French told McClatchy that the plan Murray endorses is one trying to “build the middle class by government mandate.”
Well, the private sector hasn’t done a stellar job of building the middle class. The overtime threshold increase Murray is championing would cut into retailer margins, but Costco proves that the NRF’s claim of adequate pay hindering upward mobility isn’t universally true.