DETAILED METHODOLOGY DESCRIPTION
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- Reynard Perkins
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1 APPENDIX A: DETAILED METHODOLOGY DESCRIPTION Existing empirical studies of the Executive, Administrative, and Professional exemptions to the FLSA all use data from the Current Population Survey. 1 This study is the first to use data from the Occupational Employment Statistics for this purpose. The principal advantage of the OES over the CPS is that the OES 1 See citations in the main report. is reported by firms and its primary purpose is to classify workers occupations, whereas the CPS relies on workers to self-report their occupation. A comparison of OES to CPS occupations, both within retail and in general, makes clear that title-inflation is a significant problem in the CPS, with far more workers in supervisory and management occupations according to the CPS than the OES. See Table A1. Table A1: Comparison of CPS and OES occupational classification in retail and restaurants for top 15 exempt occupations. OCCUPATION OES RETAIL & RESTAURANT CPS RETAIL & RESTAURANT First-Line Supervisors of Retail Sales Workers 1,111,040 2,990,619 First-Line Supervisors of Food Preparation and Serving Workers 691, ,635 General and Operations Managers 287, ,313 Pharmacists 183, ,068 Food Service Managers 149,510 1,005,228 First-Line Supervisors of Office and Administrative Support Workers 165,830 96,435 Bookkeeping, Accounting, and Auditing Clerks 188, ,195 Office Clerks, General 212,280 73,793 Shipping, Receiving, and Traffic Clerks 152, ,009 Sales Managers 75, ,623 Chefs and Head Cooks 75, ,546 First-Line Supervisors of Mechanics, Installers, and Repairers 58,230 32,504 Secretaries and Administrative Assistants, Except Legal, Medical, and Executive 77, ,303 Wholesale and Retail Buyers, Except Farm Products 34,060 77,914 31
2 The CPS contains two variables directly related to overtime status. The variable PEERNUOT asks do you usually receive overtime pay, tips, or commissions at your job? While it references overtime pay directly, it is not a good indicator of overtime eligibility status. The variable PEERNHRY indicates whether a worker (or other adult member of the household) reports his wage rate hourly or answers yes to the question even though you told me it was easier to report your earnings [fill in previous answer], are you paid at an hourly rate on your [main] job? While it would seem that all nonexempt workers should answer yes to this question, a significant fraction of workers earning under $455 a week answer no. Thus, no question in the CPS provides a solid indicator of exempt status. 2 Because the CPS does not directly address exemption status, and provides unsatisfactory occupational coding, previous researchers have relied on estimates of the fraction of workers in a given CPS-reported occupation who are likely EAP exempt, conditional on earning over $455 a week. 3 These industry multipliers are opaque and generally outdated; thus the OES offers an appealing alternative. Of course, it is not immediately clear that the occupational coding in the OES is more correct for the purposes of identifying those who would pass the EAP duties test than that in the CPS. However, the requirement that supervisors in the OES spend at least 80% of their time on supervisory activities suggests that the OES is, if anything, conservative in this respect. The analysis in this report thus uses OES data for the retail industry (NAICS 44-45) and the restaurant industry (NAICS 722) from the Bureau of Labor 2 Even the work schedules CPS supplement, most recently conducted in May 2004, does not directly address FLSA exemption status. See 3 See note in main report on Shierholz (2014). The 2004 Regulatory Impact Analysis relied on estimates compiled by subject matter experts in the Wage and Hour Division in the 1990s. Statistics. 4 Exempt workers are defined as those in an exempt occupation (see Appendix C for a complete list) who earned over $455 a week. 5 Note that the OES reports the 10th, 25th, 50th, 75th, and 90th percentile wage for each occupation; wages were linearly interpolated between these values, with occupations either entirely included or excluded if the threshold wage was below the 10th percentile or above the 90th percentile respectively. The number of workers affected by a potential new threshold was calculated analogously. PASSIVE RESPONSE COST ESTIMATES The OES provides no information on employees weekly hours; these data are only available from the CPS. 6 In order to calculate cost implications of threshold increases therefore, the percentage of workers who work over 40 hours per week, and the average number of hours these workers work by occupation within the retail and restaurant industries was calculated using the 2013 basic monthly CPS files. 7 Occupations in the 4 All data are from May The statelevel analysis uses the research estimates by state and industry. Some care was taken to distribute missing or suppressed employment in the state-level files, although the effects were ultimately small. The national estimates were taken at face value, even where totals were greater than the sum of constituent elements. 5 According to BLS ( OES wages are supposed to include: base rates, commissions, cost-of-living allowances, deadheading pay, guaranteed pay, hazard pay, incentive pay, longevity pay, over-the-road pay, piece rates, portal-to-portal rates, production bonuses, and tips; but to exclude attendance bonuses, back pay, clothing allowances, discount, draw, holiday bonus, holiday premium pay, jury duty pay, meal and lodging payments, merchandise discounts, nonproduction bonuses, on-call pay, overtime pay, perquisites, profitsharing payments, relocation allowances, severance pay, shift differentials, stock bonuses, tool/equipment allowances, tuition repayment, uniform allowance, weekend premium pay, and yearend bonuses. 6 For this reason, the total exempt workers and number of workers affected calculations include part-time workers. Such workers could, of course, still be exempt if they pass the salary basis test. 7 Two variables relate to hours worked, hours usually worked, PEHRUSL1, and hours actually worked in the preceding week, PEHRACT1. The latter variable was used, but results are not strongly 32
3 CPS were mapped to OES occupations using a BLS cross-walk. 8 No relationship was assumed between hours worked and salary. Because of this, and because of title inflation in the CPS, estimates of the number of overtime hours worked by affected workers are likely conservative. The cost of raising the salary threshold given a passive employer response was calculated by assuming that the fraction of workers working any overtime all work the average number of overtime hours. Workers hourly salaries are set at 1/40th of their weekly salary. For each occupation, therefore, this implies a break-even wage, where paying time-and-a-half overtime for all hours beyond 40 costs the same as the new overtime exemption threshold. All workers earning more than this under the current system are assumed to have their salary increased to the new threshold; those earning less than this are assumed to be made nonexempt. MODELING FIRM ADJUSTMENTS As described in the body of the report, the adjustment model assumed that all affected workers who work over 40 hours per week 9 will fall into one of three groups: workers in group 1 will have their base salary increased so as to remain exempt, but will see their bonuses and benefits cut by similar amounts; those in group 2 will have their hourly wage rate set in such a way that their total compensation remains unchanged; those in group 3 will see their hours cut to 38 per week, with their salary cut proportionally a conservative estimate since such workers managerial duties are likely to be curtailed as well. The key assumptions of the model are these: Among workers working over 40 hours per week, all workers for whom the new threshold represents no more than a 7.5% salary raise fall into group 1. Of the remaining workers, 2/3 are in group 2, and 1/3 group 3. Those hours cut among group 3 workers are assumed to be made up for by part-time workers working 30 hours per week. CALCULATION OF ADJUSTMENT COSTS Changing employee compensation schemes causes significant disruption as small-business owners and human resource personnel work to communicate and implement whatever strategy is chosen to adjust business operations to the new regulatory requirements. To calculate the cost of this disruption, estimates were made of how much time ( people years ) would be required for human resource (or small-business owners) to implement a particular type of change. A people year means one HR or IT employee or small-business owner working the equivalent of one year to implement that category of change. Assumptions were then made regarding the level of manager required to make a particular category of change and the annual compensation of that level of manager. No allowance was made for the fact that some of these changes will result in recurring annual expenses (hiring part-time employees, for example). The following table, therefore, really estimates the loss in productivity from senior managers throughout the industry all being required to implement workforce changes throughout their companies in order to comply with these new requirements. sensitive to this. Only workers in the outgoing rotation group were considered, and observations were weighted according to the ORG weights (PWORWGT). Those working more than one job were not excluded, but only hours for the first job were considered Those working 40 hours a week or less are not explicitly modeled though, as discussed in the text, they may experience certain negative consequences as well. 33
4 Table A2: Transition costs under three possible threshold increase scenarios in people years and actual dollar costs. OE calculation based on interviews with industry experts. WORKERS HR PEOPLE YEARS IT PEOPLE YEARS DOLLAR COSTS $610 SCENARIO Pay Increased (Group 1) 223, $10,036,755 Base Hourly Rate Cut (2) 188,033 3, $251,964,220 Hours Reduced (3) 94, $29,615,355 Part Time Hired 28, $5,106,600 Total 533,459 3, $296,722,930 $808 SCENARIO Pay Increased (Group 1) 252, $11,357,190 Base Hourly Rate Cut (2) 415,789 6, $557,157,260 Hours Reduced (3) 207,894 1, $65,486,610 Part Time Hired 75, $13,659,660 Total 951,952 8, ,399.1 $647,660,720 $984 SCENARIO Pay Increased (Group 1) 127, $5,739,750 Base Hourly Rate Cut (2) 571,593 9, ,143.2 $765,934,620 Hours Reduced (3) 258,796 1, $81,520,740 Part Time Hired 117, $21,144,780 Total 1,075,410 11, ,895.7 $874,339,890 34
5 APPENDIX B: EAP OCCUPATIONS IN RETAIL Table B1 presents a list of all occupations from the OES identified as potentially EAP exempt. Specifically, it is assumed that workers in these occupations earning over $455 a week are EAP exempt. The total number of workers who fall into this category, and the percentage of total employment, is also given. This list was constructed after reviewing job descriptions from O*NET; 10 however final decisions on which occupations to include or exclude were made by hand. Table B1: Exempt occupations OCCUPATION NUMBER EARNING OVER THRESHOLD % OF First-Line Supervisors of Retail Sales Workers 993, % First-Line Supervisors of Food Preparation and Serving Workers 488, % General and Operations Managers 287, % Pharmacists 183, % Food Service Managers 149, % First-Line Supervisors of Office and Administrative Support Workers 147, % Bookkeeping, Accounting, and Auditing Clerks 146, % Office Clerks, General 120, % Shipping, Receiving, and Traffic Clerks 88, % Sales Managers 75, % Chefs and Head Cooks 66, % First-Line Supervisors of Mechanics, Installers, and Repairers 58, % Secretaries and Administrative Assistants, Except Legal, Medical, and Executive 55, % Wholesale and Retail Buyers, Except Farm Products 34, % Accountants and Auditors 28, % First-Line Supervisors of Production and Operating Workers 26, % Billing and Posting Clerks 20, % Business Operations Specialists, All Other 17, %
6 OCCUPATION NUMBER EARNING OVER THRESHOLD % OF Receptionists and Information Clerks 15, % First-Line Supervisors of Transportation and Material-Moving Machine and Vehicle Operators 13, % First-Line Supervisors of Helpers, Laborers, and Material Movers, Hand 13, % Market Research Analysts and Marketing Specialists 12, % First-Line Supervisors of Non-Retail Sales Workers 12, % Human Resources Specialists 11, % Chief Executives 11, % Executive Secretaries and Executive Administrative Assistants 11, % Payroll and Timekeeping Clerks 10, % Financial Managers 9, % Loan Officers 9, % Administrative Services Managers 9, % Production, Planning, and Expediting Clerks 9, % Managers, All Other 8, % Graphic Designers 8, % Interior Designers 7, % Cost Estimators 7, % Software Developers, Applications 7, % Training and Development Specialists 6, % Purchasing Agents, Except Wholesale, Retail, and Farm Products 6, % First-Line Supervisors of Protective Service Workers, All Other 5, % Web Developers 5, % Network and Computer Systems Administrators 5, % Computer Programmers 4, % Optometrists 4, % Procurement Clerks 4, % Credit Authorizers, Checkers, and Clerks 3, % Dietitians and Nutritionists 3, % Transportation, Storage, and Distribution Managers 3, % Advertising and Promotions Managers 3, % Purchasing Managers 3, % First-Line Supervisors of Personal Service Workers 3, % Computer Operators 3, % 36
7 OCCUPATION NUMBER EARNING OVER THRESHOLD % OF Public Relations Specialists 3, % Computer Systems Analysts 3, % Hearing Aid Specialists 3, % Computer and Information Systems Managers 2, % Marketing Managers 2, % Software Developers, Systems Software 2, % Loan Interviewers and Clerks 2, % Management Analysts 2, % First-Line Supervisors of Construction Trades and Extraction Workers 2, % Computer Network Support Specialists 2, % Orthotists and Prosthetists 2, % Labor Relations Specialists 2, % First-Line Supervisors of Housekeeping and Janitorial Workers 2, % Dancers 1, % Registered Nurses 1, % Respiratory Therapists 1, % Human Resources Managers 1, % Compensation, Benefits, and Job Analysis Specialists 1, % Audiologists 1, % Securities, Commodities, and Financial Services Sales Agents 1, % Computer Occupations, All Other 1, % Buyers and Purchasing Agents, Farm Products 1, % Private Detectives and Investigators 1, % Credit Analysts 1, % Art Directors % First-Line Supervisors of Landscaping, Lawn Service, and Groundskeeping Workers % Writers and Authors % First-Line Supervisors of Farming, Fishing, and Forestry Workers % Editors % Logisticians % Database Administrators % Compliance Officers % Advertising Sales Agents % 37
8 OCCUPATION NUMBER EARNING OVER THRESHOLD % OF Sales Engineers % Audio and Video Equipment Technicians % Operations Research Analysts % Architectural and Civil Drafters % Computer Network Architects % Financial Analysts % Healthcare Practitioners and Technical Workers, All Other % Medical and Health Services Managers % Information Security Analysts % Commercial and Industrial Designers % Financial Specialists, All Other % Insurance Claims and Policy Processing Clerks % Lawyers % Landscape Architects % Electronics Engineers, Except Computer % Industrial Engineers % Industrial Production Managers % Title Examiners, Abstractors, and Searchers % Aircraft Cargo Handling Supervisors % Compensation and Benefits Managers % Fashion Designers % Training and Development Managers % Coaches and Scouts % Computer Hardware Engineers % Teachers and Instructors, All Other, Except Substitute Teachers % Health Educators % Engineers, All Other % Health Diagnosing and Treating Practitioners, All Other % Insurance Sales Agents % Medical Equipment Preparers % Mechanical Engineers % Legal Support Workers, All Other % Curators % 38
9 OCCUPATION NUMBER EARNING OVER THRESHOLD % OF Interviewers, Except Eligibility and Loan % Producers and Directors % Desktop Publishers % Public Relations and Fundraising Managers % Drafters, All Other % Architectural and Engineering Managers % Property, Real Estate, and Community Association Managers % Paralegals and Legal Assistants % Budget Analysts % Electrical Engineers % Real Estate Sales Agents % Physicians and Surgeons, All Other % Food Scientists and Technologists % Occupational Health and Safety Specialists % Construction Managers % Fabric and Apparel Patternmakers % Nurse Practitioners % Technical Writers % Fundraisers % Social and Community Service Managers % Musicians and Singers % Multimedia Artists and Animators % Camera Operators, Television, Video, and Motion Picture % Computer and Information Research Scientists % Statisticians % Soil and Plant Scientists % Occupational Health and Safety Technicians % Commercial Pilots % Civil Engineers % 39
10 APPENDIX C: DETAILED RESULTS TABLES FOR TOP 15 OCCUPATIONS Table C1: Detailed results for top 15 occupations (by number of workers currently exempt) OCCUPATION TITLE TOTAL CURRENTLY EXEMPT BY $610 BY $610 (%) BY $808 BY $808 (%) BY $984 BY $984 (%) First-Line Supervisors of Retail Sales Workers First-Line Supervisors of Food Preparation and Serving Workers General and Operations Managers 1,111, , , % 570, % 758, % 691, , , % 362, % 488, % 288, , % 43, % 71, % Pharmacists 183, , % 0 0.0% 0 0.0% Food Service Managers 150, ,000 20, % 55, % 86, % First-Line Supervisors of Office and Administrative Support Workers Bookkeeping, Accounting, and Auditing Clerks 166, ,000 39, % 84, % 112, % 189, ,000 55, % 109, % 146, % Office Clerks, General 212, ,000 65, % 121, % 121, % Shipping, Receiving, and Traffic Clerks 152,000 89,000 48, % 89, % 89, % Sales Managers 76,000 76, % 0 0.2% 14, % Chefs and Head Cooks 75,000 66,000 14, % 31, % 43, % First-Line Supervisors of Mechanics, Installers, and Repairers Secretaries and Administrative Assistants, Except Legal, Medical, and Executive Wholesale and Retail Buyers, Except Farm Products 58,000 58, % 14, % 24, % 78,000 55,000 24, % 44, % 55, % 34,000 34,000 6, % 13, % 18, % Accountants and Auditors 28,000 28, % 4, % 8, % 40
11 Table C2: Detailed results for 13 industry sectors (by number of workers currently exempt) SECTOR TOTAL CURRENTLY EXEMPT BY $610 BY $610 (%) BY $808 BY $808 (%) BY $984 BY $984 (%) Nonstore Retailers 461, ,000 24, % 56, % 72, % Health and Personal Care Stores Motor Vehicle and Parts Dealers Electronics and Appliance Stores Building Material and Garden Equipment and Supplies Dealers Furniture and Home Furnishings Stores Miscellaneous Store Retailers Sporting Goods, Hobby, Musical Instrument, and Book Stores Clothing and Clothing Accessories Stores General Merchandise Stores 1,016, ,000 31, % 75, % 98, % 1,774, ,000 60, % 135, % 182, % 496,000 98,000 20, % 44, % 56, % 1,190, ,000 51, % 124, % 163, % 448,000 87,000 20, % 42, % 54, % 808, ,000 36, % 73, % 89, % 607,000 93,000 28, % 55, % 68, % 1,450, ,000 56, % 116, % 150, % 3,105, , , % 236, % 306, % Food and Beverage Stores 2,928, ,000 82, % 186, % 254, % Gasoline Stations 857,000 95,000 32, % 64, % 86, % Food Services and Drinking Places 10,290, , , % 483, % 663, % 41
12 APPENDIX D: LIST OF LAY JOB TITLES FOR TOP 15 EXEMPT OCCUPATIONS Table D1: Lay titles for top 15 exempt occupations STANDARD OCCUPATIONAL TITLE First-Line Supervisors of Retail Sales Workers First-Line Supervisors of Food Preparation and Serving Workers General and Operations Managers Pharmacists Food Service Managers First-Line Supervisors of Office and Administrative Support Workers Bookkeeping, Accounting, and Auditing Clerks Office Clerks, General Shipping, Receiving, and Traffic Clerks Sales Managers Chefs and Head Cooks First-Line Supervisors of Mechanics, Installers, and Repairers Secretaries and Administrative Assistants, Except Legal, Medical, and Executive Wholesale and Retail Buyers, Except Farm Products Accountants and Auditors LAY JOB TITLES Assistant Manager, Assistant Store Manager, Bakery Manager, Deli Manager, Department Manager, Manager, Meat Department Manager, Office Manager, Shift Manager, Store Manager Assistant Manager, Cafeteria Manager, Dietary Manager, Dietary Supervisor, Executive Chef, Food Service Director, Food Service Manager, Food Service Supervisor, Kitchen Manager, Restaurant Manager Chief Operating Officer (COO), Director of Operations, Facilities Manager, General Manager (GM), Operations Manager, Plant Manager, Plant Superintendent, Store Manager, Vice President of Operations, Warehouse Manager Clinical Pharmacist; Hospital Pharmacist; Outpatient Pharmacy Manager; Pharmacist; Pharmacist in Charge (PIC); Pharmacist in Charge, Owner (PIC, Owner); Pharmacy Informaticist; Registered Pharmacist; Staff Pharmacist; Staff Pharmacist, Hospital Banquet Manager, Catering Manager, Director of Food and Beverage, Food and Beverage Manager, Food Service Director, Food Service Manager, Food Service Supervisor, Kitchen Manager, Restaurant General Manager, Restaurant Manager Accounting Manager, Accounts Payable Supervisor, Administrative Supervisor, Customer Service Manager, Customer Service Supervisor, Director, Office Coordinator, Office Manager, Office Supervisor, Team Leader Account Clerk, Account Receivable Clerk, Accounting Assistant, Accounting Associate, Accounting Clerk, Accounts Payable Clerk, Accounts Payable Specialist, Accounts Payables Clerk, Accounts Receivable Clerk, Bookkeeper Administration Assistant, Administrative Assistant, Clerk, Customer Service Representative, Office Assistant, Office Clerk, Office Coordinator, Office Manager, Receptionist, Secretary Receiver, Receiving Clerk, Receiving Manager, Shipper, Shipping and Receiving Clerk, Shipping Clerk, Shipping Coordinator, Shipping/Receiving Clerk, Traffic Manager, Warehouseman Director of Sales, District Sales Manager, General Manager, Regional Sales Manager, Sales and Marketing Vice President, Sales Manager, Sales Representative, Sales Supervisor, Store Manager, Vice President of Sales Banquet Chef; Certified Executive Chef (CEC); Chef; Chef, Instructor; Cook; Corporate Executive Chef; Executive Chef (Ex Chef); Executive Sous Chef; Head Cook; Line Cook Crew Leader, Electrical Foreman, Facilities Manager, Facility Maintenance Supervisor, Maintenance Foreman, Maintenance Manager, Maintenance Planner, Maintenance Supervisor, Production Crew Supervisor, Superintendent Administrative Assistant, Administrative Associate, Administrative Secretary, Administrative Specialist, Administrative Technician, Clerk Typist, Department Secretary, Office Assistant, Secretary, Staff Assistant Buyer, Category Manager, Mechandiser, Merchandise Manager, Procurement Specialist, Product Manager, Purchasing Manager, Trader Accountant, Accounting Manager, Accounting Officer, Accounting Supervisor, Business Analyst, Certified Public Accountant (CPA), Cost Accountant, Financial Reporting Accountant, General Accountant, Staff Accountant; Assurance Manager, Assurance Senior, Audit Manager, Audit Partner, Auditor, Auditor-in- Charge, Deputy for Audit, Financial Auditor, Internal Audit Director, Internal Auditor 42
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