Raising the minimum wage will help improve healthcare productivity

President Barack Obama will renew his call for raising the minimum wage in his State of the Union address this month. It's long overdue and could have a positive effect on the healthcare sector, which employs a large number of low-wage workers.

From the perspective of those workers, the argument in favor of raising the minimum wage is compelling. It hasn't been raised since July 2009, when it was increased to $7.25 an hour. Simply adjusting for inflation would lift it to just under $8 an hour.

Nineteen states and the District of Columbia already have higher minimum wage laws. Some states are moving toward raising it to $10. The president last year called for a $9 minimum. Yet for a full-time worker, that is still only $18,000 a year.

Delivering healthcare doesn't just require highly skilled doctors, nurses, information technologists, technicians, lab workers and scientists. Providers also need orderlies, nurses' assistants and home healthcare aides. Of the more than 14.6 million jobs in healthcare, fully 2.4 million occupy these lower-skilled jobs, according to the Bureau of Labor Statistics.

These occupations are also among the fastest-growing jobs in healthcare. BLS projects the number of home health and hospice workers—already around 1.5 million employees—will grow by 48% over the next decade. The number of nursing assistants and orderlies is expected to grow by 21%.

Yet wages in these occupations are extremely low and are expected to remain so. The BLS category that includes home health, nursing and behavioral health aides had a median wage of only $11.30 an hour in 2012. The trade association for home healthcare companies pegs the average wage for workers at its companies at about $9.50 an hour.

Supporters of a minimum wage increase correctly point out that workers across all these lower-wage occupations will benefit from an increase in the minimum wage. When the lowest rung on the wage ladder goes up, all the rungs near the bottom tend to rise with it.

So from a healthcare provider perspective, raising the minimum wage might appear at first glance to be an unalloyed negative. With hospital margins already under pressure and government cutting back reimbursement across the board, any government-mandated increase in the wages paid to their low-skilled employees could send more institutions hurtling toward the red.

Yet opposition from the healthcare sector is muted. The major hospital associations have remained on the sidelines during recent debates, and even the National Association of Home Care & Hospice, which last year fought extending the overtime provisions in the Fair Labor Standards Act to its workers, is not opposed to a minimum wage increase per se. It says the government should provide adequate funding for its members' services so they can afford an increase.

An instructive American College of Healthcare Executives' poll out last week identified financial challenges as the No. 1 concern of hospital CEOs for the 10th straight year. But in their ranking of the issues that keep them up at night, 85% checked government funding cuts as their No. 1 concern followed by Medicaid reimbursement (81%), declining Medicare reimbursement (81%), bad debt (67%) and decreasing impatient volume (64%). Only half worried about the increasing cost for staff and supplies, which together account for two-thirds of overall provider costs.

Economists endlessly debate the impact of raising the minimum wage on jobs. Some argue employers will respond by hiring fewer low-wage workers. Others say its effect on employment is neutral.

One thing both sides agree on is that employers—including those in healthcare—when faced with a rising wage tab look for ways to improve productivity to offset their increased labor costs. That's a good thing because rising productivity is what drives higher living standards for workers in every sector of the economy.

Healthcare providers today are engaged across the board in efforts to increase the quality of the care they deliver while lowering costs. Increasing the productivity of labor at every level of their organizations is crucial to that effort.

There's no doubt raising the minimum wage may cause some short-term pain in some parts of the industry. But if it spurs on greater efforts to become more productive—think of substituting tele-monitoring for round-the-clock home health aides, for instance—the long-term benefits will more than offset the costs.

It will benefit those organizations as they streamline their operations to more productively deliver higher- quality care. And it will benefit low-wage workers, who may be slightly fewer in number but will have slightly higher pay.

Follow Merrill Goozner on Twitter: @MHgoozner