Who Wins (or Loses) in Overtime Exemption?

(Photo: Garry Knight)

The U.S. Department of Labor is proposing to end the overtime exemption of “companions” (home assistants typically employed to assist/watch the infirm elderly) employed by an agency. The exemption would remain for companions employed directly by a private individual. This rule would lead to classic results: 1) Higher labor costs through agencies, no doubt passed onto older people in the form of higher prices, leading to less employment through agencies; 2) A shift to more companions employed directly by individuals. 

I’m not sure what the demand elasticity for companions is, but it is unlikely to be small. Moreover, the negative effect on jobs through agencies will be larger than the positive effect through increased direct employment. Also, agencies reduce transaction costs (including background checks, arranging tax payments, etc.), so this change will also raise those costs and reduce well-being.  The only winners appear to be the bureaucrats who would have more rules to enforce and those agency companions who keep their jobs. (HT to FH)


Mike B

Aren't agencies already at a disadvantage for having to pay all those employment related taxes that only a sucker or someone planning to run for public office would pay a privately employed care worker?

164

The point is to make home care more affordable. Institutions are expensive and the government pays many of the bills.

Patrick

How does preventing people from working more than 40 hours result in cheaper care. All "overtime" is not paid at 1.5 times salary, and this new regulation will require training more workers, costing agencies and the government more.

jonathan

But you could use the same argument to allow child labor or to eliminate overtime for all workers. After all, not having 8 year olds working in the factory raises costs. In other words, it's not merely cost but the entire package that's at issue. Fairness for the workers? Lower costs for some people - not all. It would be wonderful if the costs were all shared according to some formula that looks at what a person has but that isn't the way life works. Many of these workers are poor and most seem to be at the bottom of the earning scale - looking it up, seems that 40% of these workers still qualify for food stamps. Some of their clients are poor. Some of the clients are rich. We have no way of distinguishing them. But it isn't just, "Oh, it will cost more."

For background, we pay for home care for our mother. She needs 24 hour a day complete assistance. It costs a lot. We have the providers on payroll because the law is now clear that you are breaking the law if you don't pay the proper taxes. If that makes us "suckers", as another comment says, then so be it. We follow the law. We pay the people who care for our mother.

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Do you also have a worker's compensation insurance policy?

From the perspective of protecting workers, that's one of the big advantages to having them work for an agency. The agencies are normally bonded and insured. Many private individuals attempt to pay the taxes correctly, but few seem to buy an insurance policy that makes sure the employee will be compensated for a back injury caused by lifting a disabled person.

Ryan

You guys should cover the bill in congress regarding making IT employees overtime exempt.

John B. Chilton

"The only winners appear to be the bureaucrats who would have more rules to enforce and those agency companions who keep their jobs."

Agree there's a net welfare loss, but what about the agency companions who keep their jobs, standard hour wages held constant?

I suppose you could argue that wages will adjust so that the standard hourly wage falls and the overtime hourly wage rises in such a way that compensation for the same number of hours is unchanged. Add to this mix the idea that agencies are not constrained to step up the rate they charge customers when the companion reach the overtime mark.

tOM Trottier

You're assuming that no overtime will be paid, that more people will be employed. Given the costs of finding and keeping good workers, perhaps overtime would be paid and workers would benefit from all the hours they put in. Even if not, then more people would have jobs. Perhaps wages will increase due to the increased demand.

Yes, government regulations increase costs - but these would also increase the income of the lowest-paid workers, either by paying overtime or employing more.

This is good news.

tOM Trottier

Oh, for the days of slavery when you just had to feed the slaves chitlins for 18 hours of work and let them sleep in the shed.

tOM Trottier

It seems to me elasticity would be really low. Having a household worker is more a necessity than a frivolity for the disabled.

Mandie

I'm worried about the quality of care that the people that need these aides are going to get. I'm fortunate enough to work for a company that does pay overtime, that also allows us enough time with our patients to be certain they are getting the care they require. Many privately-hired aides are not certified, and aren't educated in they type of care many of these people require.
That being said, the majority of home health aides out there now, really care about their job, love every person they are taking care of, and deserve to be paid a fair wage for what they do. Its a tough job.
Its hard to put a price on someones quality of life, whether its the person giving the care, or the person receiving it. Lets hope this message doesn't get too lost on those who are on the never ending hunt to earn that last dollar.