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At the Wage Floor: Covering Homecare and Early Care and Education Workers in the New Generation of Minimum Wage Laws

This paper focuses on an important subset of workers who provide homecare and early care and education services to the very young, people with disabilities, and those who are frail due to age or illness. We explain the need to raise these workers’ wages and the unique structure of their industries.

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woman teaching and woman in kitchen preparing food
, Elizabeth del Rocío Camacho, Pablo Serrano

In November 2012, fast-food workers in New York went on strike and the Fight for $15 was born. Over the last five years, the movement has lifted wages for more than 17 million workers across the nation by fighting for and winning numerous minimum wage policies (National Employment Law Project 2016). Substantial minimum wage increases are underway in California, New York, Oregon, and more than 30 cities and counties around the country. In states and cities covered by them, these new minimum wages will increase earnings for 25 to 40 percent of workers (Reich, Allegretto, and Montialoux 2017; Reich et al. 2016). After four decades of wage stagnation and rising inequality, the movement has delivered real, much needed, and meaningful progress in a remarkably short period of time.

Fast food has been iconic in the discussions of the minimum wage, from the influential mid-1990s research that found no negative employment impact of wage increases in the industry, to the fast-food workers who have walked out on strike in cities across the country in recent years (Card and Kruger 1995). But of course the reach of these wage increases extends well beyond fast food to underpaid workers in multiple industries. The dynamics of minimum wage increases vary across industries based on each industry’s specific structure.

Nowhere are the distinct dynamics more pronounced and challenging than for those employed in human services industries. This paper focuses on an important subset of these workers: those who provide homecare and early care and education services to the very young, people with disabilities, and those who are frail due to age or illness. We explain the pressing need to raise these workers’ wages and the unique structure of their industries that results in a funding squeeze for wage increases—at the root of this is the fact that most families are unable to afford all of the homecare and child care they need, never mind pay enough to ensure that workers earn a living wage, and public human services are chronically underfunded.

These workers provide a critical (but too often unrecognized) public good; as such, we argue that a significant public investment is a necessary part of the solution, both to deliver minimum wage increases to these workers and to cover the significant unmet need for care. We provide background about the shared and divergent challenges in the homecare and early care and education industries, as well as review emerging policy initiatives to fund wage increases for homecare and early care and education workers and identify principles for public policy going forward.

The Care Work Conundrum

Our focus on workers in both the homecare and the early care and education industries brings attention to a critical part of our nation’s labor force that is often overlooked. Later in this paper we will provide a detailed and nuanced discussion of the distinctive aspects of each industry, but here we offer a simplified overview of care work to highlight dynamics impacting both industries. To make some of the dynamics clear, we reduce the complexity of these sectors and detail perspectives in the private market for care. (This reduction is quite substantial—public dollars play a significant role in these industries—but we believe it is also useful because, in some ways, the very problem here is that these markets are too heavily private.)

In general, in the private markets for both homecare and early care and education (ECE), there are three critical perspectives. Each perspective on challenges and concerns is unique. First, there are the buyers, the people (relatives of the recipients of care or the recipients themselves) who pay for the services. Second, there are workers, those who are paid to provide services. And third, there are recipients of the services.

Now, consider the situation from each perspective. From the perspective of someone purchasing care (e.g., a parent securing ECE for a toddler or a daughter trying to secure a home health aide for her aging father), the paramount simultaneous concerns are affordability (because in general, the cost of care is beyond the families’ means) and quality (because quality has a direct impact on the well-being of the recipients).

Turn to the perspective of the worker. Her pay is so low (roughly $10 per hour) and her benefits so paltry that making ends meet is a constant concern. No matter how devoted and skilled, she faces the constant stress of a poverty-wage job. And, in truth, if she wants to stay in the sector and advance her skills, she still faces a very low-wage career.

Finally, there’s the perspective of the person receiving care, for whom the paramount concern is the relationship with her caregiver or teacher. The stronger and more consistent the relationship, the greater the likelihood for high-quality services; for children this means more abundant opportunities for learning and growth, and for adults a higher quality of life.

But the low wages in care services nearly guarantee turnover. Each worker who leaves the industry erases established connections and requires the recipient of care to start from scratch again.

In sum, from the perspective of every actor in the private market for care, there are grave concerns. While these concerns appear distinct, they are in fact all of one piece and share a common solution. Even though care is often prohibitively expensive for purchasers, it is simultaneously so low wage that it generates destructive levels of workforce and care instability. To raise wages would increase the already extremely high cost of care for families. To reduce the cost of care would push already extremely low wages further down. This is the fundamental conundrum in the private market for care services in the U.S. But the conundrum is a function of the fact that care is treated as a largely private concern in our country. With consistent and adequate public investment, wages could rise and quality increase without making care unaffordable.

It is an oversimplification of the current system to focus only on the privately-funded parts of the care services markets; there are substantial and complex public investments in care services in the United States, as will be detailed below. But more is needed: sufficient public investment is crucial in order to meet the intersecting needs for access to quality, affordable services and decent wages for workers. The care market conundrum cannot be resolved on the private side of the exchange.

The Case for Public Investment

Increasing the minimum wage, as the Fight for $15 has, brings this conundrum into the spotlight. Care wages hover just above the labor market floor, so the cost of care labor will rise along with minimum wages. But if increasing labor costs raises the cost of care, already stressed families will be even less able to afford it. Most clients and families who are paying for care out of their own pockets are not in a position to pay more; many are already struggling to pay even at current rates. Raising prices means that fewer families will be able to afford care; it may actually push them into the informal grey market in the search for cheaper care, possibly to the point of paying below the minimum wage. This is the core challenge of providing homecare and child care to everyone who needs it in the U.S.: most families are unable to afford all of the care they need and workers in these industries bear the burden of this as reflected in their abysmally low wages.

Only significantly higher public investment will create a sustainable bridge across this gap. Public investment is what the sector has long needed. The push for mandated minimum wage increases offers another chance to make the argument and make the investment. And across the country, leaders are doing just that, as illustrated by examples at the end of the report.

But this will only happen if minimum wage activists and policy makers are clear about and committed to designing policy that reaches care workers and invests in improving their wages while significantly boosting public funding to cover the cost of the wage increases. With their eye on this issue, activists, advocates, and policy makers can fully embrace the challenge of raising wages in the care sector. From the outset, a focus should be on building the political will to devote substantial public resources to doing so.

There is a strong, well-documented economic case for systematic and significant public investment in care:

Investments promote the quality of care. Workers who are better paid stay in jobs longer and are less stressed. As a result, they form stronger relationships with those they care for and make stronger contributions to their health and development (Howes 2014; Whitebook and Sakai 2004). Studies have shown that when homecare wages are increased, worker turnover decreases significantly (Ko et al. 2015; Howes 2008). In homecare, evaluation has shown that workers who receive additional training can provide more effective services (California Long-Term Care Education Center 2016). In early care and education, decades of research has shown that programs rated as providing higher quality services to children paid higher salaries and had lower rates of turnover among the workforce (Whitebook, Howes, and Phillips 2014; Whitebook et al. 2001). Thus, the stability of the early care and education workforce leads to better outcomes for children.

Care investments promote economic growth by boosting earnings and lifetime incomes, reducing poverty and reliance on public income supports, increasing tax revenues, and potentially increasing labor force participation of mothers and other unpaid caregivers (Bivens et al. 2016). The availability of high-quality and reliable early care and education increases worker productivity, decreases absenteeism, and reduces turnover among parents in the labor force (MacGillvary and Lucia 2011). Furthermore, the gains from high-quality early care and education experiences are borne out over a child’s lifetime in better school, health, and economic outcomes, and lessening the need for other social interventions. Studies have shown that investing in high-quality early education yields a high return on investment of up to 13 percent through better education, economic, health, and social outcomes, yet those who care for and educate our youngest children remain among the lowest paid workers, earning less than those who watch our cars (parking lot attendants) (Heckman 2012). More and better care for seniors and people living with disabilities reduces negative health outcomes and allows them to remain in their homes (LaPlante et al. 2004; Allen, Piette, and Mor 2014). Increased investment in homecare also reduces the overall cost of long-term care (Robison et al. 2012).

Care investments promote equity. Women, and in particular women of color, are disproportionately represented in poorly-paid care work, so improving the quality of homecare and early care and education jobs shrinks the earnings gap between men and women, as well as the race gap among women (Cooper 2017; Huizar and Gebreselassie 2016). It also raises the family income of paid caregivers, thus reducing poverty among their children and other family members. Further, women provide far more unpaid care than men do, hurting their overall lifetime earnings and increasing their poverty rate, especially in old age (National Alliance for Caregiving (NAC) and AARP Public Policy Institute 2015). This is important because people in low-income households too often go without the care they need, receive care of poor quality, and live in families particularly burdened by both unpaid care and care expenditures disproportionate to their incomes. Improving care infrastructure would support and strengthen these families.

With regard to young children, studies show that the achievement gap can begin as early as infancy, when the physical conditions and stresses of poverty can take their toll on the development of the child’s brain and therefore the ability to learn. A multitude of research suggests the answer to closing the achievement gap lies in promoting high-quality early childhood education (Nelson 2006). Yet, uneven access to high-quality early care and education persists, and the achievement gaps that are present at kindergarten entry between children from high- and low-income families are vast. The benefits accruing directly to the children receiving high-quality care and educational resources are large and have long-term effects, leading to improved educational outcomes and high-school graduation rates, and an increasingly productive workforce that will boost economic growth, provide budgetary savings at the state and federal levels, and lead to reductions in future generations’ involvement with the criminal justice system (Bivens et al. 2016; W.S. Barnett and Masse 2007; Belfield et al. 2006). Public investments to improve the wages of the early care and education workforce can help to promote access to quality services for children, regardless of their family’s ability to pay.

The case for greater public investment is strong. Higher wage floors bring this need to the forefront of advocates’ and policy makers’ attention.

A Brief Overview of the Industries

The nation’s care workforce numbers at least 4.4 million and is growing rapidly. Care work includes just over 2.4 million homecare workers1 and another 2 million workers in early childhood care and education.2 These care workers generally earn very low wages with weak benefits, although importantly, in some regions of the country they have been able to improve the quality of their jobs through organizing and unionization (Dresser 2008) and sustained public investments (McLean, Dichter, and Whitebook 2017).

As shown in Table 1, the median hourly wage for care workers in 2016 stood at just $10.29 an hour and employer-provided health insurance was uncommon. And while these are some of the fastest growing occupations in the economy, their inflation-adjusted wages have been stagnant over the past decade. Moreover, the workforce is disproportionately women of color and immigrants.

Even workers that secure full-time hours in these jobs do not clear the poverty line for a family of three. Perhaps obvious, but it bears noting, given the average wage of $10 per hour, raising the wage floor to $15 presents a significant opportunity and benefit to these workers. Equally, without public investment, the wage increase is likely to significantly challenge providers and purchasers in this market.

State Initiatives

CALIFORNIA

In California, the issues for care workers were central to the discussions on raising the minimum wage at the state and local levels from the beginning. There was recognition that new minimum wage policies would significantly increase the cost of some state-funded programs; these included the IHSS program that provides homecare subsidies to low-income seniors and individuals with disabilities, other service programs for people with developmental disabilities, and several different child care subsidy programs. The final statewide minimum wage policy included a slower implementation timeline than advocates’ original proposal in order to ease the burden on the state budget by phasing in the cost over multiple years, with wages rising to $15 in 2022 and 2023 for smaller businesses. It also included a provision to allow the state to temporarily delay scheduled minimum wage increases if an economic downturn led to a large loss of state revenue.

In both the IHSS and child care programs, funding the increasing wages was made even more challenging because of cuts that had been made to the programs in response to the state’s budget crisis during the Great Recession. The state had the additional budgetary challenge of restoring previously cut funding along with paying for higher wage rates required by the new minimum wage policy. In the case of the IHSS program, the 2016–17 state budget included funds to restore previous cuts in service hours, cover overtime pay that a recent change in Fair Labor Standards Act regulations required for the first time, and cover the cost of the minimum wage increase.

In the case of ECE, California likewise included funds (spread over several years) to (1) restore some of the previous cuts and (2) increase reimbursement rates to reflect the projected costs to early care and education providers due to increases from the state minimum wage (Legislative Analyst’s Office 2017). The 2017–18 budget allocated funds to update child care subsidy eligibility requirements and to allow families to retain their eligibility for child care subsidy for a 12-month period in order to create stability for providers, children, and their parents. Simultaneously, the state added additional slots for full-day State Preschool for low-income families. Despite these recent increases, California child care program funding remains half a billion dollars below 2007–08 pre-recession levels and serves 66,000 fewer children than in 2009–10 (Schumacher 2018)

MAINE

A campaign is currently underway in Maine to both raise worker wages and provide homecare to all seniors and people with disabilities who need it. In early 2018, Maine People’s Alliance successfully submitted enough signatures to include a statewide referendum on universal homecare on the November 2018 ballot. If approved by voters, the program would provide homecare for more than 10,000 seniors and individuals with a disability, increase wages for workers, and provide training to professionalize homecare work. The program would cost $310 million a year and would be funded through a payroll tax increase of 1.9 percent for those earning more than $127,000 a year. It would also include a 3.8 percent tax on individuals earning over that amount through non-wage income sources.

Principles for Moving Forward

With the federal minimum wage stuck at $7.25 an hour, state and local strategies to raise wages have become a key tool for addressing growing income inequality in the United States. But the promise of these new laws will not be fully realized without addressing the unique challenges of raising wages for homecare and child care workers. The above case studies demonstrate that with careful planning and political will, states and cities can find the resources to lift the wage floor for care workers.

Short Term: Five Principles

For policy makers looking to follow their lead in the near term, here are five principles for moving
forward:

  1. Cover care workers in minimum wage laws, without exception: Homecare and child care workers should be fully included in minimum wage laws, regardless of idiosyncrasies of funding streams.
  2. Develop plans for public funding increases from the start: In the most successful minimum wage increases, stakeholders come together to address the need for additional public funding from the outset, as part of the policy design of the proposed law. This includes higher reimbursement rates and increased access to subsidy.
  3. Support increases to worker compensation above the required minimum wage, especially for workers with more training, education, and experience: In order to attract and retain highly skilled staff to homecare and early care and education positions, public policy should support a wage scale that acknowledges and incentivizes the educational attainment and ongoing learning necessary to improve and sustain the quality of services across settings and program types. In doing so, workforce development programs should be designed to provide advancement for existing workers in order to maintain diversity in staffing that is reflective of the families served.
  4. Reform child care subsidy eligibility rules and parent fee schedules to align with increasing wage levels, in order to prevent families who receive a minimum wage boost in their earnings from losing subsidies or facing fees that offset the benefit of higher, though still low, earnings.
  5. Ensure comprehensive ongoing data to inform policy and investment: Assess available data about homecare and early care and education workers to determine the gap between existing earnings and new legal minimums, and to project additional funds necessary to address equity and compression in earnings across the industries. Ensure comprehensive ongoing data collection to inform policy and investment, and to assess their impact.

Long Term: Full Public Funding

Short-term policy solutions to help bridge the gap as minimum wages rise can and should be built into the existing systems, policies, and programs that purchase, subsidize, and regulate care. In the long run, however, we need an efficient and universal system that delivers care as a right and rewards the workers who provide services. Aligning funding streams and recognizing the public good of workers providing care, as well as directly investing in these workers, are some steps toward a universal and more public system of care. For early care and education, funding programs akin to K-12 education, in which every child is guaranteed access to services, may be the best long-term solution. Similarly, in homecare, public policy solutions such as a long-term care financing system are needed for those whose income places them outside the range of existing long-term care programs, but who cannot afford the cost.

Ultimately, our goal should be to fully fund the public good—meaning that we invest public resources to fully meet the need for homecare and early care and education in our society, regardless of ability to pay. This is both the right thing to do for the recipients of services and the people—mostly women, and disproportionately women of color—delivering services. It is also the only comprehensive way to address the lack of access to care and the low wages that currently prevail in both the public and private pay markets. At a time when so many are concerned about automation and the disappearance of work, caregiving jobs are here to stay. They deserve a greater public investment from us in the form of living-wage jobs.

Moderator NOTE:  Please see original source for full report and end notes.