Title inflation: How a sneaky corporate tactic masks falling real earnings

There was a time, not that long ago, when job titles were self-explanatory. Today, however, you’d be forgiven for not knowing what the role of a happiness hero entails, or a sales ninja for that matter. This hyperinflation of job titles comes at a time when average hourly earnings are actually decreasing.  

Could this all be by design? 

A newly released study by researchers at Harvard and the University of Texas estimates that more than 70,000 employees in the U.S. have been the victim of a sneaky tactic that involves employers using "fancy" managerial titles in lieu of better pay. 

Within organizations, managerial roles have traditionally been associated with "increased responsibility and oversight scope," the researchers note. A manager of a restaurant, for example, might find herself in charge of the weekly schedule or the monthly budget. In other words, she would be responsible for making decisions that directly affect those working in a less senior position. Those in managerial roles are often responsible for interviewing candidates and making decisions on who gets hired and who gets fired. Because of the added responsibilities, managers tend to receive higher salaries, bonuses, etc. That’s why, as the authors note, the federal government officially recognizes "managers" as both a distinct and special class. There is a clear line between managers and regular employees — or at least there used to be. 

The researchers investigated the extent to which U.S. companies now hire employees with "potentially deceptive managerial job titles." One example given includes a front desk attendant who was hired as a "director of first impressions." The work duties are the exact same as those of a regular front desk attendant; it's the same old job dressed up in fancy-sounding jargon. 

The job title may seem overblown or ridiculous to some readers, but employers do this for a very specific reason, write the authors: so they don’t have to pay overtime for any extra hours worked by an employee. By law, employers in the U.S. must pay overtime to all employees who earn less than $684 a week and do not occupy any sort of managerial position. By elevating a job title to "director," "administrator," "supervisor," etc., employers circumvent this law. 

An egregious example of this, as highlighted by the researchers, is the Family Dollar Store, which allegedly gave a "disproportionate share" of employees senior-sounding titles like "store manager." However, as the paper demonstrates, although some employees "occasionally performed managerial duties," they spent anywhere between 60 and 90 hours each week "performing manual labor tasks'' like stocking store shelves, operating cash registers, unloading trucks, picking up garbage in the parking lots, and mopping the floors and bathrooms — duties not intuitively associated with the manager of a Family Dollar Store.

In 2008, a class-action suit was filed against the store. The court ruled in the plaintiffs' favor, declaring that employees' job titles failed to accurately reflect their daily duties. In the end, due to the inflated job titles, 1,424 employees were awarded $35 million in unpaid overtime.

The Family Dollar Store story hasn’t dissuaded a number of other businesses from adopting similar tactics, however. The researchers' central finding is that, across the country "there is a systematic, robust, and sharp increase in firms' use of managerial titles around the federal regulatory threshold."