Double Trouble: Taxpayer-Subsidized Low-Wage Jobs in Pennsylvania Nursing Homes

Authors: 
Stephen Herzenberg
Publication Date: 
April 13, 2015

Read the press release

Executive Summary

Pennsylvania is an aging state and getting older – our state has the fourth-highest 85-plus age group, a group that is expected to grow by more than 400,000 by 2030. Many of these older Pennsylvanians will need nursing home care at some point in their lives.

Unfortunately, low wages for nursing home workers mean that many caregivers struggle to make ends meet and often qualify for public assistance to support their families. Low wages also contribute to turnover which affects caregivers’ ability to deliver care.

Nursing home care is largely publicly financed through Medicaid and Medicare. Taxpayers and public officials have a right to demand that these tax dollars go to providing high-quality nursing care and living-wage jobs so we can rebuild the middle class in Pennsylvania.

Most frontline nursing home workers in Pennsylvania earn wages that don’t support a family

The median wage for nursing assistants in Pennsylvania nursing facilities is currently $13.01 per hour, or only $27,061 per year for a full time worker (paid for 40 hours per week for all 52 weeks).  This means that fully half of all nursing assistants in our state earn less than this amount per year.  Dietary or housekeeping workers earn $10 to $11 per hour, roughly $21,000 to $23,000 per year for a full-time, full-year employee.  For a single parent family with even just one child, these wages are below a living wage (a wage high enough for workers to support themselves without public assistance) in virtually every county in Pennsylvania.

Just over half (52%) of Pennsylvania nursing home workers surveyed say that they cannot support their families on the wages they earn. Sixteen percent say they work more than one job.

Taxpayers are subsidizing – in many cases “double subsidizing” – poverty-wage jobs in Pennsylvania nursing homes

In 2013 taxpayers directly subsidized Pennsylvania nursing homes to the tune of $5.9 billion – $4.08 billion from Medicaid and $1.7 billion from Medicare – amounting to two-thirds of all Pennsylvania nursing home revenue.  The percentage of public funding in the for-profit sector is even higher – 81%.  These public payments helped Pennsylvania nursing homes generate $370 million in profits (including net income at non-profit facilities) in 2013.

At the same time, 14% of nurse aides and 28% of dietary workers say they or someone in their family receives public assistance.  By way of example, to make ends meet one full-time nursing home worker in western Pennsylvania depends upon public supports for day care and health care for her children, at a cost to taxpayers of $20,472 per year. Public assistance allows low-wage nursing home workers to get by when wages are inadequate and is an additional public subsidy to the industry, amounting to an estimated tens of millions of dollars per year.

Public dollars should be spent on living-wage jobs and rebuilding the middle class

Raising wages for nursing home workers will allow more families to support themselves without relying on public assistance.  A minimum start rate of $15 per hour at nursing homes would benefit nearly 50,000 workers. It would also put over $300 million into their pockets, generating about 1,500 jobs at Pennsylvania businesses and generating over $30 million in new tax revenue for the state and municipalities.

Even before considering the offsetting cost savings, lifting low-wage workers to $15 per hour is affordable – amounting to an increase of only about 4% of total costs based on Medicaid cost reports filed by Pennsylvania nursing homes. 

Some of the resources for lifting wages at the bottom should come from reining in excessive compensation at the top. In a recent seven-year period, the CEO of Manor Care received annual compensation averaging $18.4 million, $129 million in total.  For an industry that derives most of its revenue from public sources, why are CEO salaries over 600 times the average nursing assistant’s salary acceptable?

Living-wage jobs can improve care

Low wages contribute to high turnover and disrupt the caregiver-resident relationship that is at the heart of high quality care. Raising wages would reduce turnover, improving quality and saving recruitment costs that would help pay for higher wages. Based on industry estimates of turnover costs, cutting turnover in half from the industry standard of 66% for nursing assistants could, by itself, pay for a 60-cent per hour increase in caregiver wages. 

Now is the time for a $15 per hour minimum wage for nursing home workers

While the national push to lift wages to $15 per hour began in the fast food industry and in selected cities, the time has come to include the Pennsylvania nursing home industry in this movement to reduce historically unprecedented levels of income inequality and restore basic fairness to our economy. Taxpayers and the public have the right to demand that their tax dollars promote good jobs that allow caregivers to support their own families and achieve the highest possible quality for consumers – not poverty jobs that impede efforts to improve quality of care for seniors and people with disabilities.

Recommendations

It’s time for Pennsylvania nursing homes – an overwhelmingly publicly funded industry that is responsible for the care of some of our most vulnerable citizens, and a sector big enough to have a significant impact on our economy – to raise their minimum wage to $15 per hour. No full-time nursing home worker in Pennsylvania should depend upon public assistance to make ends meet or to support her or his family. Raising wages for nursing home workers is affordable and will benefit thousands of nursing home workers and their families, improve care for seniors, and inject millions of dollars into the economy of our state.

Legislators and the Governor should begin by gaining a full understanding of the extent to which nursing home workers are dependent upon public assistance and the level of this subsidy to the industry.

  • Lawmakers should pursue legislation that requires the nursing home industry to report the wages of its workforce so the public knows which facilities provide a living wage.
  • Legislators should require nursing homes to reimburse the state for the cost of its full-time employees receiving Medicaid and other public assistance programs to which the state contributes.

Read the full briefing paper