Why Raising Healthcare Workers Wages Pays Off
As MIT's Zeynep Ton explains in The Case for Good Jobs, business leaders often worry that raising the minimum wage will cause financial harm to their businesses, but those fears are not justified.
For instance, research from Kellogg shows that rises in the minimum wage resulted in productivity gains of around 4.5%. This could be due to the greater effort being put in, but could also be due to the reduction in stress caused by simply making ends meet.
Living wage
These challenges have been especially severe in the healthcare sector, with data from the UK's NHS showing that cost of living pressures are forcing many nurses to leave the profession. So initiatives such as the Californian proposal to raise the minimum wage in the sector to $25 an hour are significant.
Research from UC Berkeley's Labor Center explores what the change might mean for the sector and for workers in it. The study revealed that approximately half a million workers and their households stand to gain substantial economic advantages from the proposed wage increase.
Extensive analysis conducted by the Labor Center indicated that a significant proportion of those earning meager wages would experience an impressive surge of around 30% in their income. Consequently, this progressive step would result in a modest average cost increment of approximately 3% across the healthcare sector.
The researchers are also confident that increasing the minimum wage would yield positive outcomes for patients, employees, and the industry at large. Notably, it would contribute to curbing high turnover rates, facilitating improved staffing levels, and enhancing overall performance measures, including reduced hospitalization durations and even lower mortality rates.
Learning from the past
A sign of what's possible comes from the healthcare company Aetna, which raised the minimum wage across its workforce to $16 per hour in 2015.
The company found that the move cost them around $27 million, but this investment was easily paid back in terms of both better employee retention and also productivity.
To quantify the potential benefits of a wage hike, Aetna's team analyzed various factors, such as reduced employee turnover, improved attendance, enhanced focus on work, and the consequent ability to offer better service. After scrutinizing the figures, they concluded that it simply made good business sense to raise wages.
Good jobs
The Berkeley researchers show that the low wages paid to healthcare support workers, direct care workers, and healthcare service workers in California have resulted in their constant struggle to meet basic needs.
Moreover, these substandard wages have significantly contributed to the persistent challenge of maintaining sufficient staffing levels across the state's healthcare sector. The repercussions of staffing shortages reverberate through patient care, manifesting as prolonged wait times, extended hospital stays, and insufficient treatment of chronic ailments.
The proposed policy, however, promises substantial benefits for workers and their families. Our estimations indicate that over 469,000 workers would be directly impacted by the proposed wage increase.
This encompasses more than 50,000 workers who presently earn just above $25 per hour but would receive a pay raise to preserve their pay premium. On average, the affected workers would experience a noteworthy wage increase of over $5.74 per hour, equivalent to approximately a 30% boost in their earnings.
Reducing inequality
The proposed wage increase would disproportionately benefit workers of color, constituting 70% of those affected, as well as women who represent three-quarters of the affected workforce. A significant majority of these workers serve as the primary income providers within their households, and nearly half have dependent children.
The higher wages, collectively accounting for 1.3% of personal health spending in the state, would lead to an estimated 3% rise in operating costs across healthcare facilities, with considerable variation observed among different types of establishments. These estimated impacts on health expenditures do not account for the additional savings that can be achieved, however, through the enhanced productivity of healthcare workers.
The researchers suggest that there is a strong and established correlation between higher remuneration, reduced turnover rates, and improved staffing levels, ultimately resulting in a superior quality of care for consumers. It is therefore expected that raising the pay of healthcare workers would yield positive patient outcomes, including shorter hospital stays and reduced mortality rates.
While it's tempting to think that raising the pay of workers is something that only incurs costs, the research is a welcome reminder that doing so can also produce benefits that far outweigh the costs involved in introducing the higher pay. With healthcare workers across the world fighting for higher pay at the moment, this is perhaps something for providers to keep in mind.
