Companies Are Using This Tool To Cut Costs

Companies Are Using This Tool To Cut Costs

( – It’s no secret times are tough economically, despite what President Joe Biden would have one believe. Reports of widespread layoffs have been pouring in for months, especially in the tech sector, and inflation continues to spiral out of control. As profit margins tighten up across the economy, a new study has revealed a devious strategy company executives are using to get their subordinates to turn in more work for less money: job title inflation.

What Is Job Title Inflation, and How Does It Work?

A new study from the National Bureau of Economic Research found “widespread evidence” that companies have been promoting employees to managerial positions in order to avoid paying them for overtime work. This strategy relies on a federal law that exempts companies from paying workers who are officially employed as “managers” and make a certain amount of money.

In many cases, those who hold the titles have no managerial responsibility at all. The study uses the example of “Directors of First Impression,” which, in reality, are front desk assistants. However, officially listing these employees as managers allows companies to save money by not having to pay them for overtime.

One example the study highlights is of a retail chain that elevated a large number of its workers to positions with the word “manager” in the title. The paper reveals, while these employees did have some limited leadership responsibilities, many of them spent up to 90 hours a week doing manual tasks, including working cash registers and stocking shelves.

What Other Impacts Can Job Title Inflation Have?

Aside from providing an avenue for managers to skirt technical overtime pay requirements, the inflation of job titles can have other advantages for senior managers.

For example, presenting someone as a “vice president” rather than a “director” when the individual is in a client-facing role, might make those outside the company take them more seriously. This allows executives to create the impression they’re devoting more resources to a meeting or project when more employees are present. Inflating job titles might also benefit employees’ job satisfaction, enticing them to stay with a company despite getting paid less and working more.

Of course, it’s not all bad news for employees. Having an impressive-sounding job title can act as a boost on resumes, helping departing workers to negotiate higher pay and better conditions at their next job. On a broader scale, however, this sleight of hand is creating a lot of uncertainty in the labor economy and making it more difficult to pin down exactly what’s involved in a given job.

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