SENIOR CARE OPERATORS MUST RESPOND TO RISING WAGES

Caregivers are expected to be in short supply, but will the state-led minimum wage increases attract new talent or lessen families’ access to caregivers? Read about my opinion in the post below:

Maryland and D.C. have voted to approve an increase in the minimum wage while Virginia has not. D.C. led the pack in 2016 when Mayor Muriel Bowser signed an Act that would increase D.C.’s minimum wage a little each year until July 1, 2020. Afterwards, the minimum wage will remain at $15 per hour. The minimum wage requirement applies to any employee who works at least 50 percent of the time in D.C., regardless of where the worker resides. The date of this post marks the second to last minimum wage increase in D.C. As a result, D.C.’s minimum wage will be $14 per hour until July 1, 20201.

Currently, Maryland’s minimum wage is $10.10 per hour. At the end of March 2019, Maryland’s General Assembly overrode Governor Larry Hogan to pass an Act that will increase Maryland’s minimum wage over the course of seven years. Below is a summary of the state’s planned increases2:

For companies with at least 15 employees, this is the schedule of increases:

  • $11.00 on Jan. 1, 2020
  • $11.75 on Jan. 1, 2021
  • $12.50 on Jan. 1, 2022
  • $13.25 on Jan. 1, 2023
  • $14.00 on Jan. 1, 2024
  • $15.00 on Jan. 1, 2025

For companies with fewer than 15 employees, this is the schedule of increases:

  • $11.00 on Jan. 1, 2020
  • $11.60 on Jan. 1, 2021
  • $12.20 on Jan. 1, 2022
  • $12.80 on Jan. 1, 2023
  • $13.40 on Jan. 1, 2024
  • $14.00 on Jan. 1, 2025
  • $14.60 on Jan. 1, 2026
  • $15.00 on July 1, 2026

Personal care aides typically make more than the current minimum wage, but home care agencies and senior living communities will likely need to pay their aides more, especially as the minimum wage approaches $15 per hour. An RTI International report in 2017 found that nationwide 87% of healthcare support-related occupations in assisted living (AL) and continuing care retirement communities (CCRCs), namely personal care aides, will require wage increases if the minimum wage increases to $15 per hour3. Experts believe that even if caregivers are currently making more than $15 per hour, employers of personal care aides will have to increase their wages due to the “spillover” effect. That’s because the caregivers may find more valuable work elsewhere, say for a firm that does increase its wages. As a result of the minimum wage increases, it is likely that caregivers who work in the home and in the community will receive a pay bump regardless if they make minimum wage or not.

If the communities assume all of the financial impact from the increased labor costs, they may be able to preserve demand for their rooms. However, that is an unlikely scenario as investors will want to mitigate the financial impact of wage increases. A more likely scenario is that communities will pass on labor cost increases to the consumer in the form of higher monthly rates. Higher monthly rates will translate to less affordable housing options to consumers.

I believe the same dynamic will persist for home care agencies and registries: minimum wage increases will cause these firms to pay their caregivers more and then to pass on part of the cost increases to the consumer by charging more.

Fortunately, there is a winner in all of this: the hard-working people we know as caregivers. The US health care system needs more of them and needs them to remain with their clients longer. Higher wages will hopefully help resolve both of those issues. It’s not fair to the families and seniors who are constantly having a new face walk in their house because the former caregiver had to leave her job to find a better opportunity—that’s unhealthy for both the caregiver and the senior. So while wage increases may make access to care more difficult for some, it has the potential to better many more lives. If you are concerned about the rising cost of care, talk to a senior advisor. He or she may be able to guide you to an affordable option.

Sources
https://www.dcbar.org/pro-bono/newsletters/summer-2016/Minimum-Wage-2020.cfm
https://www.baltimoresun.com/politics/bs-md-minimum-wage-explainer-20190328-story.html
https://www.theceal.org/images/reports/RTI-CEAL-Minimum-Wage-Report-2017-FINAL.pdf

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