Over at Wandering Scientist the other day, Cloud posted about the negativity of internet haters. Measured, thoughtful criticism is a gift. Snarky personal attacks don’t really add much to the discussion. But because the internet often allows for anonymity, the internet is full of the latter. When people don’t worry about social judgment, and don’t worry about being caught, it doesn’t tend to bring out the better angels of human nature.
Which brings me to the topic of today’s post: the treatment of domestic workers in the US. Researchers from the University of Chicago and domestic worker advocacy groups recently undertook a nationwide survey of housekeepers, nannies and other caregivers (generally for the elderly). The New York Times covered the results, and here is a link where you can download the whole report.
Suffice to say, the surveyed workers reported some pretty shabby treatment. About a quarter of workers earned less than the minimum wage. Many reported incurring injuries (although I was not surprised that about a third of nannies had contracted an illness in the line of work — I’m surprised it’s not 100% since my kids get me sick all the time). Others reported working many days straight with no break, of feeling unable to refuse overtime, of getting no paid time off, and of being verbally abused. But for me what was the kicker was that 91% of domestic workers reported that their employers did not contribute to Social Security. In other words, only 9% of nannies and housekeepers are being employed on the books.
As a member of that 9% of employers doing things legally, that figure really bothers me, especially in light of the report’s subtitle: “The Invisible and Unregulated World of Domestic Work.” In reality, domestic work isn’t unregulated. In most cases, minimum wage laws apply. In New York where we used to live, employers were legally required to pay time and a half over 40 hours, to provide regular days off, to have disability and workers comp insurance for all employees, and so forth. The problem is that so few families are following the laws that exist. So you can slap all the new laws on the situation that you want. But if 91 percent of families who have nannies and housekeepers are going about their lives breaking the basics of employment law, they’re not going to feel obligated to follow any new regulations either.
I think the bigger problem is in the first part of the subtitle: domestic work is often invisible. It’s invisible when family members (e.g. moms) do it, and it’s invisible as part of a paid arrangement, when much of it takes place in homes and other private spaces that people aren’t really policing. Most families don’t have many domestic workers and so there aren’t the eyes of crowds watching behavior.
But beyond that, one of the key factors driving illegal situations is that families aren’t worried about getting caught. Unless you’re running for public office, you have almost no chance of your illegal behavior — hiring undocumented immigrants, and/or not paying Social Security taxes, unemployment compensation premiums, etc. — coming to light. No one is quizzing nannies in the parks, asking to see paychecks with evidence of tax withholding. I’ve heard a few stories of people facing hefty fines when a nanny is let go and tries to collect unemployment benefits, leading state labor department officials to investigate why there’s no employer ID number. But these stories are rare, too. After all, there are plenty of domestic workers who’d prefer not to pay taxes as well, and so go along.
The report does note that there should be more policies supporting two-income families and other families with caregiving responsibilities. Which is fine. But I’m not terribly sympathetic to the excuse that employing people legally is complicated (nope, you can outsource payroll to a payroll company) or expensive. It’s no more expensive than any other job. The difference between what it costs an employer to employ someone, and what that employee takes home, is an inefficiency involved in all legal economic transactions. We tolerate that inefficiency — i.e., our taxes — because we want roads, schools, police, health care, a military, courts, etc. Presumably, many of those 91% of employer families paying off the books want those things too. I’d love to see some better mechanisms for enforcement in this area.
It’s considerably more expensive for an individual to have an employee than for a corporation to have an employee, because a corporation can deduct wages paid as an expense against taxable income and an individual can’t.
I will grant that the complication factor can be outsourced.
It is expensive to hire a maid/nanny to begin with, and most families cannot afford this. If a family cannot afford to hire a maid/nanny *and* follow employment regulations, then they cannot afford a maid/nanny. And then they are just one of a large group of most of the other families, who cannot afford such a luxury.
We use a day care center, so I’ve never figured out the costs of employing a nanny properly. But I see this same effect with housecleaning services. We employ our housecleaner via a company. Many of my friends employ someone directly, and I suspect many of those people are being employed under the table. Some of my friends are horrified by how much our service costs- roughly twice what their cleaner costs them. But our cleaner is bonded, insured and covered by the state workers comp and unemployment schemes. She gets time off. I’d rather pay more and have the cleaner come less often than employ someone illegally. And I’m never, ever going to run for office or be up for a public position!
If your friends pay a housecleaner over $900 in any calendar quarter, and/or are writing the paychecks out to the person’s name instead of to a licensed cleaning company (like CleanHome LLC, or TidyHome, Inc), then they definitely ought to re-assess their decision not to file payroll taxes. Yikes.
I suspect some of them are hiring undocumented immigrants, and that is why they don’t pay taxes. Others are too lazy to do it “right,” others really can’t afford to pay more, and probably a few are just ignorant of the issues. Because of the undocumented immigrant angle, it is a super touchy topic here in SoCal, so I generally just steer the discussion elsewhere.
@Cloud and hush- the undocumented immigrant angle is certainly part of this. About half of the household employees surveyed were foreign-born, and half of those were not here legally. I am sympathetic that people need to earn money regardless of how they came to the US , and if someone is here illegally, they can’t be hired and paid legally. But I don’t think we can just pick and choose laws not to follow, especially when there are many other motivations (like laziness and saving money) that point in the same direction of paying under the table. And I would not be surprised if the women who are undocumented are the ones subject to the most abuse — they’re the ones who are less likely to speak English, can’t complain to the authorities, etc.
“if someone is here illegally, they can’t be hired and paid legally.” Well, yes and no – it’s not always quite that simple and there are often nuances to the analysis – which is why a good immigration lawyer is worth her weight in gold. If an employee has a SS# that matches her name, she’ll pass e-Verify muster. If she has that plus proof of an Alien Registration Number, then there won’t be any issues on the I-9 form (which the authorities almost never see anyway). One could pass both of these tests and still technically be out-of-status (aka “illegal’). The real sniff test for whether someone has a lawful immigration status or not is “We’d love to hire you and take you on vacation with us outside the country – are you able to travel?” If the answer is no, they’re out of status – but with a good lawyer could obtain a lawful status… it’s complicated.
If it’s $900 per QUARTER, that’s a LOT of money – I’d be surprised if people getting their houses cleaned twice a month or every 2 weeks would hit that limit? Or maybe cleaning in SoCal is just WAY more expensive??
We live in a place with 4 seasons, and we pay a lawn care business slightly over $900 a quarter during the 2nd and 3rd quarters. If we were paying an individual, we’d definitely owe payroll taxes on them.
I’m also one of the 9%-ers: not paying taxes is just crazy, crazy, crazy, and I fail to see how the 91%-ers (wow, disappointing statistics there) think the benefits outweigh the risks and the harms. My sense is most of them are just not thinking it through – especially in cases where the employee demands to be paid under the table. The real economic harm done to a woman who fails to earn 40 SS credits is hard for some people to comprehend, I guess.
If someone asked to be paid under the table, I would not hire them. Full stop. If they’ll cheat on their taxes, how can I ever be confident they won’t cheat me? How can I trust them to behave ethically in my home?
I live in WA State, and one of the penalties for not filing payroll taxes on a household employee is the potential loss of a professional license. And the kicker is, it’s not rocket science. Everything can be filed electronically or outsourced if one can’t be bothered.
@Hush – my guess is that there’s a lot of not-thinking-it-through going on. Because most people don’t pay occasional babysitters on the books (like one who’s there once a week for 3 hours) they may put all babysitting in that same bucket. But there’s no gray area about someone who is working for you, in your home, 45 hours a week. That’s an employee.
My family ran into this when trying to find caregivers for my elderly grandparents. Sometimes you get what you pay for, and if you pay less than minimum wage or pay people under the table, my guess is that you’re not hiring quality people to begin with. (I’m sure there are exceptions). Plus, when you go through an agency, there are background checks and insurance and all that other stuff that provides some peace of mind that the loved ones are not going to be mistreated and that if they are, there is some recourse available. I mean, if you’re paying a domestic worker under the table and he/she steals from you, are you going to go to the police to say “my illegal worker stole from me?” Probably not.
Our situation was eventually resolved by moving the grandparents into a high-quality assisted living facility. It’s not perfect (Grandpa has taken to complaining about the food), but all the staff people are always smiling and kind, and they seem to have low turnover which indicates to me that they’re paid decently. Of course, it’s not cheap, but again, you get what you pay for.
(As a side note, seeing how much money it takes to live in comfort in retirement – particularly when/if you need round-the-clock care due to illness – is a powerful motivator for me to save for my own…but that’s a different topic!)
@Pamela – yes, this issue of a transaction being outside the law has downsides for both parties. Although I wonder how often the employers are prosecuted after bringing a theft or other such charge against someone who turns out to be working off the books?
It also turns out that you probably can’t have too much money saved for retirement!
I’ve been thinking about this a lot also, as I work in the Hispanic market. I support immigration and entrepreneurship and as a working mom of 2 kids I have had to make tough choices about childcare and have left screaming babies in the baby room at the daycare. I think mental health services and paid time off and health insurance should be legally mandated for anyone working with kids in the US and we should be willing to pay for it. I also htink that an annual mental health exam by a psychiatrist and also some regular doctors should be required for all childcare workers in america and their jobs protected so that if they were struggling they’d get the help they were entitled to.. we have to be honest about how we live in a society that is based on a slave class and on paying less for services than you earn… and this is reflected in the lack of safety nets in child care across america bothfor the workers, the kids and the folks who use those services..
We will report on our blog sometime mid-January just how hard it was to do the tax stuff ourselves. Getting the EIN was surprisingly easy now that the IRS has a website set up that fills in the form for you if you’re hiring a nanny. We have had 5 different college students taking care of our baby over the course of the semester and one of them is probably tripping the income limit of $1,800 this year. (We will need to do a final accounting soon.)
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With our first baby we had one woman come close, and we paid her for a couple of hours work to figure out how much to withhold etc, but in the end she came in under the dollar amount for that year so we just gave her all the money back.
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I do think that the government could make this process easier for the individual not making enough to easily afford $600 annually to pay a service to figure out billing (working single moms, for example). Their new webpage with the EIN is a great start– I tried to fill out the form by hand before finding the webpage and it was really confusing and intimidating (and I spent way too much time on it). Them filling it out automatically after I answered yes to the, “Is this household help such as for a nanny” was awesome. I’m hoping the W2/W3 will be as simple as adding up how much we paid her and entering it into a box (printing and sending), but we will see. http://nicoleandmaggie.wordpress.com/2012/11/19/sometimes-the-irs-is-awesome/
Turns out we’re just under. If she were working next week like we’d planned, we’d be much closer. Not working next week combined with a few Fridays off means she’s under the limit. So no exciting W2/W3 stuff for us this year. Maybe next year!
@NicoleandMaggie- but you still have your shiny new EIN, right?
Yes. We may need it for next year.
This is so interesting-I’d never thought about it before, given that I’ve not really been in a position of hiring someone for more than an odd job here or there (like the odd babysitter for a date night.)
@Kristen – once you get up to 91% of people not following the law (I mean not for occasional babysitters, but for people clearly reporting to a regular job), there are whole communities where no one pays on the books. People are flummoxed by the idea. People who are going to pay legally often wind up going through agencies because then they know all candidates will be legal to work and willing to work on the books.
You’re supposed to pay taxes for occasional babysitters too if you pay them more than 1800/year. You hit that if you pay $35-40/night once a week.
@NicoleandMaggie- true, a parent paying $2500 to a date night sitter over the course of a year is breaking the law too. I would say, though, from an enforcement perspective, that it is illegal to go 30 mph in a 25 mph zone, and also illegal to go 60. Social goals are better advanced by first targeting the 60 mph folks. Yes, there’s the broken window theory, but in a case where a law has not been enforced at all, you risk undermining any fledgling support for enforcement by going after smaller cases first. It would be interesting to see a few high profile cases of prosecution of people whose household employees work more than 40 hours per week off the books.
Yep. The current laws incentivize parents to hire multiple sitters who under the age of 18, so that no one sitter will earn enough to trigger a payroll tax liability.
Barbara Ehrenreich writes about this topic in some depth in her 2001 book, _Nickel and Dimed_.
@Karen- she also writes the forward to this study. I always got the sense from Ehrenreich’s writings that she thought outsourcing household work was inherently exploitative, though — which I don’t agree with. If you pay legally and pay a living wage, you’re creating a good job. And some such jobs are pretty high end — remember that story from the NY Times about the $180k/year nanny? An outlier to be sure. But that doesn’t sound particularly exploitative.
I loved the tale of the $180k nanny who spoke multiple languages and could properly ride and dress a horse – she sounded amazing.
@hush – oh, I know! It is a bifurcated profession, for sure.
Thank you for this post, Laura! Although I think I’m slightly biased due to the fact I work in tax resolution 🙂
I have never actually dealt with household employees, believe it or not, in all the years I have worked in the field. I have dealt with people who were probably really employees, but were treated as contractors (i.e. they got a 1099 when the really should have received a W2 and had withholdings). I have also dealt with people who hired employees, didn’t pay the taxes and got civil penalties. I have dealt with people who didn’t understand the concept of paying quarterly tax payments in order to not have a huge liability at the end of the year too. Can be very, very messy.
In short, employees (or contractors) need to understand what type of arrangement they are getting into and plan accordingly. Conversely, anyone who hires anyone (household employee or otherwise) needs to do their homework and understand the rules, and OUTSOURCE if that’s what it takes to be “legal.” Trust me, the IRS (and states) are NOT understanding in these type of situations, and the ramifications can be huge and span over many, many years.
Like many other commenters, I am surprised the percentages are what they (we have a nanny and do pay takes, etc).
I just wanted to add a little-known fact about the oddities of US immigration law… you do not have to have legal status to start your own business (you can apply for an EIN without a SSN). That is one “work-around” for undocumented domestic workers. If someone was willing to take that risk, they could legally open their own business and then homeowner simply hires them as contractor, not employee. I’m no immigration lawyer, so take this with a grain of salt.