How Would a Minimum Wage Hike Affect Your Organization?

Workforce | September 19, 2017 | by Geralyn Magan

A new report from RTI International contains data showing how assisted living settings and life plan communities would be affected if the federal minimum wage were increased to $10, $12 or $15. The report is a joint project of RTI and the Center for Excellence in Assisted Living. 

Raising the minimum wage to $10 or $12 would have a relatively small financial impact on providers of long-term services and supports (LTSS), but would hold potentially important benefits for workers currently earning only $7.25 an hour, according to a new report from RTI International.

Impacts of Potential Minimum Wage Increases on Assisted Living and Continuing Care Retirement Communities is based on a study that RTI International conducted in partnership with the Center for Excellence in Assisted Living (CEAL). LeadingAge is a founding member of CEAL, which represents a collaborative of 11 national organizations dedicated to advancing excellence in assisted living.

RTI researchers led by Dr. Joshua Wiener found that total average costs among LTSS providers would increase by 1% if the minimum wage increased to $10 an hour, and by 5% if the minimum wage rose to $12 an hour. Overall, a $15 minimum wage would increase provider costs by roughly 13%, according to the report.

LTSS Workers Rely on Public Assistance

The federal minimum wage has been set at $7.25 per hour since 2009. However, 29 states and the District of Columbia have established minimum wage floors above the federal level.

LTSS providers employ large numbers of workers who are paid the minimum wage or a few dollars more, according to the report. In 2016, the national median hourly wage was $10.03 for personal care aides working in home health care services, and $12.79 for nursing assistants working in nursing homes.

Because their incomes are so low, many LTSS workers rely on public assistance to supplement their incomes, according to the report. Approximately half (51%) of home care workers and 38% of nursing assistants rely on some form of public assistance, including the Supplemental Nutrition Assistance Program, Medicaid, or Temporary Assistance for Needy Families.

Who Would Receive Wage Increases?

Three quarters of jobs in assisted living and life plan community settings fall into 4 common employment categories:

  • Health care and other support aides.
  • Personal care aides.
  • Buildings and grounds staff.
  • Food service workers.

Within these 4 categories, RTI researchers found that 27% of all workers would see their pay increase if the minimum wage were increased to $10 per hour. An increase to $12 per hour would affect 58% of workers, and an increase to $15 per hour would affect 86% of workers.

The report contains data showing how an increase in the federal minimum wage would likely affect hourly wages, payroll taxes, and resident and client fees. RTI researchers also outlined how hikes in the minimum wage would affect different labor categories and different states.

For example, increasing the minimum wage to $12 would require wage increases for between 58% and 71% of workers, depending on job category. The greatest percentage (71%) of workers requiring increases would be in food preparation and serving-related occupations.

Researchers also found that some states would experience greater estimated impacts from an increase in the minimum wage because their workers, on average, earn less than workers in other states. For example, increasing the federal minimum wage to $12 for personal care and service-related occupations would require an annual wage and payroll tax increase of roughly $2,799 per worker in California and roughly $5,023 per worker in Texas, where wages are lower.

Costs and Benefits

Low wages in assisted living and life plan communities can be challenging for workers and providers alike, concludes the report. Raising these wages by increasing the minimum wage is one strategy to address these problems.

“Doing so would likely positively affect workers and potentially improve recruitment and retention, reduce turnover and enhance quality of care,” write the authors. “However, raising the minimum wage would also impose costs on providers, which might respond by raising prices for services or reducing staffing and fringe benefits. These tradeoffs illustrate the issues that are inherent in raising the minimum wage in LTSS and the economy more generally.”