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)