By Steven L. Dawson
Here is the conundrum: While the demand for direct care workers—home health aides, nursing assistants, personal care workers—continues to surge, their real wages, adjusted for inflation over the past ten years, continue to fall (see Figure 1, below).
Figure 1: Direct Care Worker Wages
The impact on elders is clear: An increasingly unstable caregiving workforce—with their already low compensation eroding more each year—will further threaten continuity and quality of care. As demand climbs precipitously in this coming decade (e.g., the number of elders older than age 85 is expected to increase from 6.3 million in 2015 to 7.4 million in 2025), long-term-care consumers will be forced to find more than one million additional paid caregivers nationwide. This sobering challenge will become even more difficult if the caregiving workforce is increasingly destabilized by a continued decline in real wages.
Currently, annual earnings for direct care staff average from $18,729 for nursing assistants, to as low as $13,361 for personal care workers (PHI, 2015b). The result? Forty-nine percent of direct care workers live in homes dependent upon some form of public assistance; 51 percent return from work each night to families living below 200 percent of the poverty line.
Consider the sheer scale of this caregiving workforce:
- Direct care workers number nearly 4.3 million in the United States today, making direct care work one of the largest cluster of occupations in our country;
- Personal care and home health aides are projected to add 1.3 million workers between 2012 and 2022, more jobs than any other occupation; and,
- By 2022, the direct care workforce will number approximately 5 million—employing more workers than K−12 teachers, fast-food workers, registered nurses, police, and firefighters.
This decline in compensation is particularly confounding, given the core importance of direct care workers to our health system:
- Of the $123 billion that the federal Medicaid program commits annually to long-term services and supports, best estimates demonstrate that 40 cents of every dollar is spent on direct care services (PHI, 2013); and,
- Of the entire U.S. healthcare workforce, 27 percent are employed as direct care workers (PHI, 2015a) (Figure 2, below).
Figure 2: Percentage of U.S. Healthcare Workforce Employed as Direct Care Workers
How can a workforce that is so immense, experiencing ever increasing demand across the country—and relied upon so heavily by long-term-care consumers—still remain unable to command livable compensation?
The answer is straightforward. Those who pay for caregiving services are powerful stakeholders, while direct care workers—primarily lowincome women and disproportionately women of color—in comparison are politically and economically powerless.
Rational Stakeholder Self-Interest
Who are the powerful stakeholders who benefit from obtaining millions of hours of service from direct care workers at very low cost? They are four groups: public policymakers, insurers, employers, and consumers. Each of these key stakeholder groups benefits from accepting the status quo of suppressed compensation—if not by intention, then at least by attending to other, higher priorities.
This assessment is intended to assign neither blame nor judgment, but rather to acknowledge that these key stakeholders calculate the economics of their alternatives, and, rationally, act accordingly. By securing direct care worker services at the lowest possible price, stakeholders understandably are responding to their immediate self-interests when balanced against other priorities, as outlined below.
The majority of direct care workers are paid with public funds; federal and state programs fund 70 percent of long-term-care services (Reaves and Musumeci, 2015). Yet while paying billions of dollars to fund direct care services, policy makers are pressed simultaneously to fund a broad array of other—often equally worthy—services that compete for the same public dollars. Given multiple, pressing demands, governments rationally perceive it in their economic self-interest to pay no more than is necessary for any service, including long-term-care services.
Although private insurers never successfully created an extensive long-term-care insurance market, federal and state governments have aggressively encouraged the creation of insurance intermediaries to replace conventional fee-for-service Medicaid and Medicare programs for long-term-care clients.
These “managed long-term-care” entities are for-profit companies and nonprofit organizations that receive a set amount of public funding per month, per person insured—and then are given broad latitude as to how those funds can be spent to cover cost of services. That latitude extends to how much the managed care companies will pay for (among a multitude of other critical services) home and residential direct care services.
The logic of perceived economic self-interest is clear: The less the insurance entity pays for direct care costs, the more money is left over—whether to pay for other essential services, other salaries, or net surplus or profit.
Employers of direct care workers have the most immediate, direct economic incentive to keep compensation low, and the vast majority does so. Direct care labor costs are generally one of the largest expenses within a long-term-care organization’s budget—up to 80 percent for paraprofessional homecare agencies—and thus any manager looking to minimize expenses understandably will first look at the business’s largest cost center.
Within the publicly funded market, this tendency is reinforced by reimbursement rates that constrict the ability of an employer to pay higher wages because reimbursement rates are typically set without regard for the actual, current costs of labor.
Within the private-pay market, greater flexibility exists to set prices and labor rates. Yet here, too, no nationwide wage increase is discernible. According to the private-pay industry’s own 2015 Private Duty Benchmarking Study, private duty revenues continue to rise even as direct care turnover has continued to increase (Home Care Pulse, 2015) (Figure 3, below).
Figure 3: Historical Median Revenue in the Private Pay Market
Whether in the public or private direct care services market, the low-investment/high-turnover model remains the norm. This is underscored by the fact that the national homecare trade associations—representing privately and publicly funded homecare agencies—were the lead plaintiffs in Home Care Association of American v. Weil, which fought implementation of minimum wage and overtime protection for the nation’s homecare workers.
Figure 4: Median Caregiver Turnover Rate in Private Pay Employment
Though troubling to acknowledge, many consumers also think minimizing labor expenses remains central to their economic self-interest, if only because of the sheer number of hours of care long-term clients typically require.
This rational economic self-interest is reflected in the public positions that consumer advocacy organizations typically take in relation to direct care worker compensation. While most of the major eldercare consumer groups in general encourage better pay and benefits, none has raised this concern to the level of a top legislative priority. Understandably, other priorities take precedence—from support of family caregivers, to insurance coverage, to medical research.
Pointedly, any aggressive support for increased compensation to paid workers would force consumer organizations to confront the question of who would pay for those increased labor costs. Would those costs be paid with members’ tax dollars? From consumers’ (i.e., their members’) pockets? The result is that the status quo of low wages and benefits remains “acceptable” to consumers and their representatives, in exchange for pursuing other, more pressing priorities, even while acknowledging the inadequacy of direct care compensation and the resulting poor quality of services.
In addition, key disability rights organizations have directly opposed increased compensation, including resistance to the U.S. Department of Labor’s approach to extend minimum wage and overtime protections to homecare aides. Many disability advocates have insisted that before homecare labor protections are mandated by federal regulation, Medicaid budgets must first be expanded to ensure those costs are fully funded. Understandably, many disability advocates fear that, without such prior funding assurances, the cost of increasing wages and job quality will result in fewer hours of services to those living with disabilities.
Direct care labor advocates often argue that the perceived economic self-interest of these stakeholders is inaccurate—that on the contrary, raising compensation for direct care workers would result in net savings, due to lower turnover costs and improved health outcomes. Although initiatives in several states have shown a correlation between higher wages and lower turnover, none has documented a resulting net savings. While it is likely that well-designed investments in advanced roles for a subset of direct care workers might generate true savings, a net savings from raising the compensation floor for the entire coterie of front-line direct care workers is very unlikely and, in any case, impossible to ascertain.
The Triple Threat
This collective stakeholder economic selfinterest is massively powerful, suppressing the real wages of direct care workers for the past decade—despite an ever increasing demand for direct care services, despite isolated successes by workforce advocates, and despite the many exceptions among key stakeholders who have valiantly experimented with alternate business models. Should historic trends continue, there is absolutely no logical reason to believe that across-the-board, direct care compensation will even keep pace with inflation.
Yet, the past is not necessarily prologue. Three exceptionally powerful trends, the “Triple Threat,” are gaining strength that could fundamentally force a recalculation of the economic self-interest of key stakeholders: the increased rate of demand for services; constricted labor supply; and, falling unemployment. In combination, these form a “triple threat” to all four key stakeholders—one that could tip the consequence of low compensation past high turnover into widespread vacancies throughout the direct care system.
For it is the fear of vacancies—of a consumer going without care; of an employer unable to fill a case; of an insurer failing to guarantee the safety of a client—that can force a recalculation of rational self-interest. Stakeholders now endure a system in which high turnover and poor service are unwelcome but grudgingly accepted, outbalanced by other priorities. But high rates of vacancies can produce an entirely different, far more dire set of consequences.
The Triple Threat includes the following:
Increased Rate of Demand. That the landscape of the U.S. population is shifting dramatically is easily visible and of no surprise: The numbers of those ages 65 years and older, and those living with disabilities, are increasing dramatically. Admittedly, demand has been escalating over the past decade, yet real compensation has continued to fall. Therefore, demand alone has not fundamentally changed the economic calculus for the four stakeholder groups.
However, the coming years will differ in that the rate of demand will increase, for our country is only beginning to ascend the aging curve: Demand for direct care staff during 2002 through 2012 rose by 917,000, while demand from 2012 through 2022 is projected to be 1.3 million—a 43 percent increase (Figure 5, below).
Figure 5: Projected Direct-Care Workforce Growth
Constricted Supply. What is far less visible is a tectonic shift in the supply of the traditional source of direct care workers: women ages 25 to 54. Between 2012 and 2022, the net number of women ages 25 to 54 entering the workforce will be only 227,000—compared to the net demand increase of 1.3 million direct care positions (Toossi, 2013) (Figure 6, below).
Figure 6: Workforce Supply 2012–2022
Yet those 227,000 women will be asked not only to fill caregiving jobs, they also will become lawyers and doctors, real estate agents, and department store clerks. That is, even if every single woman ages 25 to 54 newly entering the workforce were to become a direct care worker—which is clearly not going to be the case—there still would be too few workers to supply the increased demand for paid caregivers over the current ten-year span.
Falling Unemployment. More immediately, a strengthened U.S. economy has begun to increase overall competition for labor, as evidenced by a national unemployment rate that has slowly fallen over the past six years. In response, many cities and states are raising their jurisdictional minimum-wage levels—up to as high as $15 per hour—while several large low-wage employers, from McDonald’s to Walmart, have begun to establish their own company- or industry-specific minimum-wage levels.
While vacancy rates are difficult to define within a homecare environment, Figure 7, below, documents a clear correlation between national unemployment rates and turnover rates in nursing homes.
Figure 7: Comparing CNA Turnover Rates and National Unemployment
The parallel here is that the healthier the economy, the more job options all workers have to choose from, and the harder it becomes to attract and retain paid caregivers.
Together, this Triple Threat is gathering to challenge the direct care service system with exceptional force. Reports of vacancies, particularly in rural areas, already are being documented in both the trade press and the general media (Butler, 2012; Jacobson, 2015; Bouchard, 2015). The last time such vacancy reports became widespread was during the early 2000s, when unemployment rates also were low; yet this time, underlying demand-and-supply forces are likely to combine with low unemployment to cause a far deeper—and longer lasting—threat to consumers and other key stakeholders.
What Is to Be Done?
Until now, the four key stakeholders have accepted the inevitable results of low compensation—high turnover and low quality—because other priorities prevailed. However, if the result of low investments becomes not simply high turnover and low quality, but an absence of care services throughout the system, then the calculation of rational self-interest likely will change.
The answer to the Triple Threat is simple in concept—though quite difficult to implement: Direct care jobs must be made relatively more attractive compared to competing occupations. This will require not only competitive wages and benefits, but also other elements of improved job quality such as stable and predictable hours, higher training standards, and better supervision.
The challenge for eldercare and labor advocates is how to shape this recalculation of self-interest in such a way as to be as effective and lasting as possible. For while such a recalculation of economic self-interest may prove inevitable in the coming years, there is no guarantee that the resulting response will be structured thoughtfully, in the best interest of consumers and caregivers.
What must be done
Clearly Articulate the Triple Threat. Longterm-care advocates must articulate the Triple Threat of demand, supply, and falling unemployment as a deeply serious challenge to all four stakeholders—public policymakers, insurers, employers, and consumers—one serious enough to alter the calculation of their economic self-interests and, therefore, their financial and public policy priorities.
Directly Engage Stakeholders. Advocates must encourage a set of fundamental strategic conversations—between and among the four stakeholders—forging a set of compromises sufficient to generate effective consensus, as follows:
- Eldercare and disability consumer groups must be urged to raise the issue of increased compensation to a far higher legislative priority with public policymakers—a very difficult challenge, but one which the reality of widespread vacancies may demand.
- Publicly funded employers and managed care entities must acknowledge that they have a choice: either continue to fight increased compensation and risk vacancies across the public long-term-care system, or agree to seek higher reimbursements that are dedicated exclusively and permanently to higher wages.
- Private employers, to avoid increasing vacancy rates that could threaten their business models, must accept smaller margins, raise prices, or both, to pay workers a competitive wage.
In exchange, advocates must work with employers and managed care entities to strengthen the quality of the entire workforce—through improved training, higher certification requirements, and enhanced roles—thus helping to ensure higher quality care in return for increased investments.
Build Ladders and Raise the Floor. Advocates also must continue to expand the number of initiatives that enhance the roles of selected direct care workers—creating rungs in the career ladder between front-line aide and nurse—and ideally structure rigorous evaluations of those advancement initiatives to document the resulting increases in quality of care and cost-savings. These enhancement initiatives, targeted to specialized subsets of “advanced aides,” should then be coupled with arguments to raise the floor of compensation for all direct care workers.
This “coupling strategy,” embracing both generalized and specialized direct care workers, requires a conscious effort to emphasize the value of all direct care aides—constantly advocating for additional training and expanded responsibilities for all direct care staff—while simultaneously building career ladder advancement opportunities that impact a comparatively few aides. In this way, advocates can continue to forge the image of a high-quality workforce constantly seeking to be excellent: caring and compassionate direct care staff that provides real value to the healthcare system and not simply a low-wage workforce trying to climb out of poverty.
Insist that Wage Increases Be Mandatory and Permanent. The Triple Threat may well force across-the-board increases in compensation throughout the country, but those increases, always competing with other equally worthy services, will likely prove grudging at best.
Therefore, publicly funded wage increases must be structured as permanent, minimum floors—not one-time “pass-throughs”—and managed care insurance entities must be required to reimburse employers at a rate sufficient to pay adequately for those wage increases.
We are often reminded of Einstein’s definition of insanity: doing the same thing repeatedly and expecting a different outcome each time. Though dangerous to disagree with Dr. Einstein, that definition only is true in a static environment. Within a changing environment in which demand, supply, and labor competition are all fundamentally shifting, the opposite is true: Insanity is doing the same thing and expecting the same outcome; within this continually altering landscape, long-term-care stakeholders cannot continue to underpay millions of direct care workers, and still expect those workers to show up for work as before.
Instead, the Triple Threat requires that all key stakeholders acknowledge we are entering a fundamentally different labor market. All four stakeholders must recalculate their economic self-interest and begin to compete for those workers whom they have heretofore presumed—by making direct care jobs more attractive relative to competing occupations. This can be achieved through higher pay and benefits, predictable hours, better training, and greater support.
We must accept the hard truth that the forces that have limited compensation for direct care workers, and thus have endangered the continuity and the quality of care for elders, are primarily economic. Appeals to other interests—whether lifting low-income workers out of poverty, or providing loving care for elders—are all valid, yet to date, all have proven wholly inadequate in raising the floor of job quality for direct care staff.
Only the Triple Threat of vacancies appears powerful enough to force a recalculation of economic self-interest at a nationwide level. Fortunately, if the four key stakeholders respond thoughtfully, this threat can be redirected into an opportunity. Together these groups can redesign the roles and responsibilities of the direct care workforce—systematically and permanently benefitting both paid caregivers and the elders they serve.
Steven L. Dawson was founding president of PHI in the South Bronx, New York City, and currently consults nationally to foundations and workforce programs. In March 2016, he was appointed Visiting Fellow at The Pinkerton Foundation to author a series of opinion briefs on low-wage job-quality issues.
Editor’s Note: This article is taken from the Spring 2016 issue of ASA’s quarterly journal, Generations, an issue devoted to the topic “America's Eldercare Workforce: Who Will be There to Care?.” ASA members receive Generations as a membership benefit; non-members may purchase subscriptions or single copies of issues at our online store. Full digital access to current and back issues of Generations is also available to ASA members and Generations subscribers at Ingenta Connect. For details, click here.
Bouchard, K. 2015. “Legislation Says Maine’s Home Care Workers Deserve Better Pay.” Portland Press Herald, May 18. Retrieved January 7, 2016.
Butler, S. 2012. “Home Care Workers in Maine: Increasingly Essential Workers Face Difficult Job Conditions.” Maine Policy Review 21(2). Retrieved January 7, 2016.
Home Care Pulse. 2015. 2015 Private Duty Benchmarking Study. Homecarepulse.com. Retrieved January 7, 2016.
Jacobson, B. 2015. “Direct Care Worker Shortage Looming in Iowa.” Thonline.com. Retrieved January 7, 2016.
PHI. 2013. New Estimate: Cost of DCW Wages and Benefits. Retrieved January 7, 2016.
PHI. 2015a. “Analysis of the Bureau of Labor Statistics’ Occupational Employment Statistics Program.” Unpublished analysis.
PHI. 2015b. “Analysis of the U.S. Census Bureau. 2013 American Community Survey.” Unpublished data analysis.
Reaves, E. L., and Musumeci, M.2015. Medicaid Long-Term Services and Supports: A Primer. Washington, DC: Kaiser Family Foundation. Retrieved January 7, 2016.
Toossi, M. 2013. “Labor Force Projections to 2022: The Labor Force Participation Rate Continues to Fall.” Monthly Labor Review. Retrieved January 7, 2016.
Direct care workers are those who provide basic care for their physically and mentally disabled elderly patients. They generally work in assisted living facilities, nursing homes or hospitals. Though the demand for direct care worker is high, this profession doesn't pay that well. That's why recruiting and retaining these types of workers can sometimes be quite difficult. And with the rise of elderly population, the demand for this profession is also going to rise by 69% which will further create more obstacles. To improve the quality of the jobs, they should try to reduce the turnover, and improve the management practices. I've read quite a few top article about this topic and some various suggestions. It will be interesting how the industry addresses this problem.