How Job Title Inflation Costs Workers $4 BILLION in Wages Every Year

A new working paper published by the National Bureau of Economic Research (NBER), titled Too Many Managers: The Strategic Use of Titles to Avoid Overtime Payments, has dropped a bombshell on dirty tactics used by employers, many of which are familiar household names.

Many employees often dream of climbing the corporate ladder and obtaining a managerial position. It not only provides a sense of pride but also the potential for higher salaries and benefits. However, some companies use these titles to avoid paying fair wages and overtime to their employees.

These companies provide artificially inflated job titles, such as assistant manager or associate manager, to employees who do not have any actual managerial responsibilities. By doing so, they are able to classify these workers as exempt employees, who are not eligible for overtime pay under the Fair Labor Standards Act (FLSA).

The FLSA requires employers to pay overtime to non-exempt employees who work more than 40 hours a week. However, exempt employees are excluded from this requirement, which is why so many companies use this loophole to save money.

This practice is not only unfair but also illegal. The Department of Labor has strict guidelines for classifying employees as exempt, and job titles alone are not sufficient. The actual job duties and responsibilities must meet certain criteria to qualify for exemption.

Managers who engage in this practice risk facing legal action and penalties, including back pay for unpaid overtime, damages, and even fines.

Fighting back against unfair practices becomes more difficult, however, when employees are discouraged from or retaliated against for attempting to collectively bargain or unionize.

The NBER estimated in their working paper that this unethical practice allows companies to avoid around 13.5% in overtime expenses for each employee with an artificially inflated title hired during their study sample period. All that unpaid (stolen) labor really adds up- to the tune of $4 billion in overtime payments every year.

How can you protect yourself? Before accepting any more responsibility at work outside what is entailed in your contract, especially under a new title, ask for financial compensation that is in line with similar positions in your area, and get that higher salary IN WRITING.