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Wage Increases for Direct Care Workers Insufficient to Build Workforce
posted 09.12.2016

By Stephen Campbell

Over the next three decades, the population of adults older than age 85 will triple, and demand for direct care workers—personal care aides, home health aides and nursing assistants—will rise dramatically. We will need 1 million new direct care workers from 2014 to 2024, according to PHI research.*

The majority of this workforce growth will occur in home- and community-based settings, the result of states shifting their long-term services and supports away from institutional settings like nursing homes. Remarkably, the number of homecare workers will grow more than any other occupation, with 633,000 new jobs.

These trends are not new: from 2005 to 2015, total direct care worker employment grew by nearly a million workers, from 2.6 to 3.6 million. Again, the majority of this growth occurred in home- and community-based settings, where employment doubled, from 700,000 in 2005 to nearly 1.5 million in 2015.

Trend Toward Falling Wages Beginning to Reverse

But, as demand for direct care workers grew, their wages fell. Over the past 10 years, direct care worker real wages (adjusted for inflation) have fallen from $11.60 per hour in 2005 to $11.08 in 2015. During this period, homecare worker hourly wages stagnated. In 2005, homecare workers earned $10.21, adjusted for inflation. In 2015, they earned $10.11. Direct care workers employed in nursing homes earned $12.14 in 2005 and $11.78 in 2015.

This conundrum of falling wages in the face of rising demand is due in part to the nature of long-term-care financing. According to the Kaiser Family Foundation, providers nationwide receive 51 percent of their funding from Medicaid, followed by 21 percent from other public sources (including Medicare), and 19 percent from private insurance and out-of-pocket payments. In 2014, public funds made up nearly three-quarters of all homecare and nursing home revenue. As such, policymakers (largely at the state level) have become de facto arbiters of direct care worker wages and job quality.

While 10-year trends paint a dire picture, recent trends are more promising. From 2014 to 2015, real wages increased by $.28 nationwide for all direct care workers. This marginal increase was due in part to efforts by state policy makers. In Minnesota, the legislature passed an increased reimbursement for homecare providers, with a requirement that providers use most of the increase on worker wages. As a result, real wages for homecare workers increased from $10.89 in 2014 to $11.36 in 2015. New York also increased reimbursement for the specific purpose of raising homecare worker wages. As a result, real homecare worker wages increased from $10.67 in 2014 to $11.00 in 2015. These two initiatives alone accounted for $.09 of the total national average wage growth.

Direct Care Wages Still Too Low

Still, while there are certainly benefits to higher wages for workers, the increase is not sufficient to attract enough new workers to meet rising demand. Other low-wage occupations have seen similar increases. In fact, in 30 states, other low-wage occupations outpaced direct care worker wage growth, meaning direct care worker wages became less competitive.

In practical terms, this means current direct care workers in these states are more likely to find a better wage by leaving the field of long-term care. Long-term-care experts refer to this as the “Walmart effect,” in reference to increased turnover caused by better wages at big-box retail stores like Walmart and Target.

Additionally, despite marginal wage improvements, direct care workers still struggle to make ends meet. Because direct care workers often work part time, median annual earnings are just $16,500. As a result, 20 percent of workers come home to families in poverty. Their economic challenges come at a cost to the public: 42 percent of direct care workers rely on some form of public assistance. More than a quarter (28 percent) use food stamps to feed their families and 22 percent use Medicaid to receive medical care.

In the face of skyrocketing demand, guaranteed economic hardship is not an effective recruitment tool. We cannot keep doing the same thing with respect to worker wages and expect a different result. As Steven Dawson argued in the Spring 2016 issue of Generations , a national paradigm shift must occur before it is too late—for the sake of direct care workers, their families and the vulnerable people they serve.

*Unless otherwise noted, all research is from PHI. To report on the size, growth and composition of the direct care workforce, PHI analyzes data from the Bureau of Labor Statistics and the American Community Survey. Industry-specific revenue estimates and population projections are provided by the U.S. Census Bureau.

In early September, 2016, PHI published new fact sheets on home care workers and nursing assistants. Some key takeaways: the home care workforce has doubled in size across the past 10 years, yet one in four home care workers lives below the poverty level. Nursing assistants’ wages have decreased in the past 10 years and demand is expected to create an estimated 59,000 new nursing assistant jobs by 2024. Read the fact sheets for much more in-depth coverage of these two crucial workforce issues.

Stephen Campbell is a policy research associate at New York–based PHI (www.PHInational.org), the nation’s leading experts on the direct care workforce.

 

Editor’s Note: This article appears in the September/October 2016 issue of Aging Today, ASA’s bi-monthly newspaper covering issues in aging research, practice and policy. ASA members receive Aging Today as a member benefit; non-members may purchase subscriptions at our online store or Join ASA.


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