Some Direct Care Wages Are Increasing. Is It Enough?

On April 7, New York Governor Kathy Hochul announced a $3 increase to the state’s minimum wage for home care workers as part of the 2023 budget. The change—which would elevate the regional minimum wage for this workforce by $2 in October 2022 and by an additional dollar in October 2023—was touted as part of a plan to grow New York’s health care workforce by one-fifth over five years. It also represents a compromise, falling short of the Fair Pay for Home Care Act, which would have raised home care wages to 150 percent of the regional minimum wage.

Advocates have pointed out that a $3 increase will not be enough to make New York’s home care jobs competitive with entry-level positions in other industries and could leave workers vulnerable to benefits cliffs (when workers experience a decrease in their public benefits due to an increase in income, negatively impacting their financial situation). Further, without a corresponding increase in Medicaid reimbursement and clearly articulated accountability measures to fully fund the new minimum, its effects could be temporary or create an unsustainable burden for home care employers.

Still, seeing this workforce reflected in the state’s priorities has meaning for PHI and the stakeholders we serve.

“You hope that this is just a start, and that the state continues to invest in the workforce,” said Zulma Torres, a home health aide who has delivered testimony in favor of the Fair Pay for Home Care Act. Torres, a frequent contributor to PHI’s Direct Care Worker Story Project, reached out to us to share her thoughts on the Governor’s announcement.

“And yet, hearing the Governor say home care wages are going up brought tears of happiness to my eyes. In a job where pay has been low for so long, $3 still means a lot to us aides,” said Torres.

WAGES AS A FUNDAMENTAL DRIVER OF JOB QUALITY

According to PHI’s analysis, the median hourly wage for U.S. direct care workers (who include home care workers, residential care aides, and nursing assistants) is $13.56, with median annual earnings of just $20,200. Pay in direct care has historically remained low due to multiple factors, including under-investment in long-term care services and intersecting legacies of sexism, racism, and xenophobia that undervalue caregiving work and those who provide it. Wage rates in this field have barely kept up with inflation and failed to compete with those of occupations with similar entry requirements, such as retail and customer service jobs.

Low wages are frequently cited as a driver of poor job quality and workforce instability in direct care. Studies show wages have a disproportionate effect on job satisfaction, recruitment, and retention of this workforce. Improving pay is among PHI’s top recommendations for strengthening the direct care workforce at both state and federal levels.

Better wages are essential to transforming long-term care into an industry that fairly recognizes the value its workforce provides to our families, communities, and economies. But through more than 30 years of studying and supporting this field, we also know that job quality for direct care workers is multifaceted. Compensation is only one of The 5 Pillars of Direct Care Job Quality defined by PHI, alongside quality training, quality supervision and support, respect and recognition, and real opportunity.

HIGHER WAGES IN A PANDEMIC

With the COVID-19 pandemic compounding longstanding workforce shortages, states have looked to raise wages for these occupations. A number of states have offered one-time bonuses or time-limited hazard pay increases to direct care workers. Others, like New York, are setting new minimum wage standards in this field. In Colorado, the minimum hourly wage for direct care workers who provide home- or community-based care funded by state dollars increased to $15 in 2022, up from the statewide $12.56 minimum wage. Last month, Colorado’s state legislature also passed a bill to elevate the minimum wage for nursing assistants to $15.

These raises are significant, both for an industry in which pay increases have historically been slow and incremental and for the workers impacted. In an article about the new Colorado wage standards in The Denver Post, direct care worker Cody Jakubowski described the change of a few dollars per hour as important for a workforce where many live on the margins—while also being insufficiently competitive to keep up with the cost of living.

“Hopefully, it means an easier step to $17 an hour and $20 an hour. There’s caregivers on Medicaid taking care of clients on Medicaid,” Jakubowski told the Post, adding, “There’s a pretty good chunk of care workers that have been homeless.”

A LIVING WAGE, AND BEYOND

Two recent analyses have estimated the effects of investing in direct care worker wages at a more significant level than any state to date.

In 2020, the national aging services membership group LeadingAge published a study modeling the effects of raising direct care worker wages to a living wage in each U.S. state. The report shows that these changes would meaningfully increase pay for more than two-thirds of all direct care workers, enhancing their economic stability and reducing reliance on public assistance. LeadingAge also predicts that a living wage would grow the direct care workforce by more than 9 percent, generating cost savings from improved turnover and productivity. The report further projects a boost of more than $17 billion to local economies through increased spending by better-paid direct care workers, which could in turn create between 65,516 and 85,990 jobs in other sectors.

Last March, researchers at the City University of New York (CUNY) built on these findings in a report on the effects of elevating compensation for New York home care workers. Their study projects the impact of two scenarios, in which home care workers are either paid between $30,000 and $40,000, or $40,000 and $50,000 annually, with health insurance coverage. In both scenarios, the economic return on these investments far exceeds the costs of implementing them, with annual net gains of $3.7 billion and $6.6 billion, respectively. The CUNY report quantifies these returns across elevated tax revenues and worker spending, reductions in turnover and public assistance usage, and workforce growth in both home care and other industries.

Notably, the CUNY report emphasizes the importance of public investment in making such gains possible, particularly given Medicaid’s outsized role in shaping home care compensation. And in outlining the social benefits of transforming home care compensation—from enhancing pay equity to reducing preventable nursing home admissions to improving family wellbeing—the authors support the broader argument that caregiving is a public good whose benefits are realized across society.

RECOGNIZING WORKERS, TRANSFORMING PAY

With compensation increasing for direct care workers in multiple states, it is important to hear directly from workers impacted and to understand the difference even small changes can make in a low-paying field. At the same time, we must continue to push for transformational wage growth and the increased reimbursement needed for direct care workers to be valued fairly—as more than a low-wage workforce.