Are the DOL Numbers Correct? Recent Study Questions Accuracy of Economic Impact on Home Care Industry

A recent article written by Hoffman Miller Advertising on behalf of Private Care Association questions the validity of the economic impact analysis published by the Department of Labor regarding the proposed modification of FLSA regulations on the home care industry.  When the DOL initially proposed amending FLSA regulations eliminating the companion exemption for workers employed by third-party employers, the government produced an economic impact analysis indicating the revised regulations would have little effect.  I’m not an economist, but even I questioned the data and conclusions as contrary to common sense. Given the increased number of home care providers and the expected increased need for home care services, it is unlikely that requiring overtime premium for companions would have little impact.

The home care industry including Private Care Associates “engaged a private Research Company, Navigant Economics, to conduct an independent study on the effects of these proposed changes.”  The report can be viewed at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2017109#

According to the research company, “the deadweight losses from the proposal would far exceed the PRIA’s estimate, and that the costs of the proposal would likely exceed the benefits.”

The proposed repeal Companion Care Exemption and the Live-in Exemption to the FLSA would likely create substantial disruptions in the market for home health care, increasing the costs of companion care and reducing its availability. The Department of Labor’s PRIA understates the costs of the rule in important ways, including minimizing or ignoring a variety of compliance costs, underestimating the elasticity of demand for labor, and assuming incorrectly that demand for companion care is completely inelastic. As a result, its finding that the costs of the proposed rule would be de minimis is both unsupported and incorrect. We conclude that the costs of the rule would be substantial, including reduced availability of companion care services, lower quality of care, and increased fiscal pressure on both state governments and the Federal government, and that net costs would almost certainly exceed the net benefits.

As mentioned by Hoffman Miller Advertising:

While the comment period for the proposed rule already closed on March 21, the home care industry continues to encourage individuals to express their concerns to their elected representatives in Congress and to the DOL’s Secretary of Labor, Hilda Solis.

U.S. Department of Labor

200 Constitution Ave., NW

Washington, DC 20210

(202) 693-6000

Email talktosolis@dol.gov