Healthcare increasingly will face the type of wage pressure other sectors of the U.S. economy already have experienced, labor market experts predict.
Signs of the building pressure already have begun to emerge. Health insurer Aetna said in January that all its employees will earn at least $16 an hour starting in April. That's more than double the federal minimum wage of $7.25, which has not been raised since 2009.
A hospital system in Dallas raised hourly wages last year for some of its employees to $10.25 funded through executive bonuses.
Those follow examples of employers in other sectors of the economy also raising wages where the pool of available workers does not match their demand for new employees.
Retail giant Wal-Mart Stores grabbed the attention of the U.S. labor market in February after it raised the minimum wage of its employees to $9 an hour this year and $10 an hour by early 2016.
Roughly one week after Wal-Mart's move, retailer TJX Companies—corporate parent of T.J. Maxx, Marshalls and HomeGoods—made a near-identical announcement. All TJX workers will make $9 an hour by June and $10 an hour next year. Last week, Target Corp. became the latest company to increase the wage floor for its employees.
It's all happening because segments of the labor market are tightening. That encourages employers such as Aetna and Wal-Mart to raise wages to grab the best workers. Healthcare organizations in particular may “feel like soon, if not now, they are going to have to offer higher wages to attract and retain the most qualified workers,” said Elise Gould, director of health policy research at the liberal Economic Policy Institute.
Healthcare is one of the few industries in which there are more job openings than unemployed workers. Gould analyzed March data from the U.S. Labor Department's Job Openings and Labor Turnover survey and from the Census Bureau, and discovered healthcare and social assistance jobs are slightly more plentiful than the number of healthcare workers to fill them. That could create a worker shortage in some areas.
Compare that to the construction industry, where there are about six workers for every job. “Healthcare is one of those fields that has continually added jobs,” Gould said.
Home-care workers have warned about a staffing crisis in their profession if paychecks aren't raised. The median annual income of home-health and personal-care aides is about $13,000 after adjusting for taxes and other factors. Because the senior population is growing significantly, home-care companies are on the hot seat to bump up wages to prevent their employees from flocking to other jobs, workers contend.
But home-care companies, which have faced steep Medicare cuts over the past few years under the Affordable Care Act, may be unlikely to voluntarily increase their payroll costs in the immediate future. In January, a federal judge struck down a Labor Department rule that would have required home-care employers to pay workers higher wages and overtime—a ruling that the industry's trade group cheered.
This week in Washington, home-care workers held a town hall meeting advocating for $15 an hour, a figure that fast-food workers and other low-income earners also have been demanding.
“No one who works a full-time job should have to live in poverty,” U.S. Labor Secretary Thomas Perez said at this week's rally. “America is experiencing a home-care crisis, and unless home-care workers receive higher pay, we won't be able to meet the long-term needs of either caregivers or our aging population.”
Attracting talent is not the only impetus behind boosting salaries, said Gary Burtless, an economist at the Brookings Institution who has worked at the Labor Department. Companies also want to save time and money that is wasted on training new hires who ultimately quit. Aetna CEO Mark Bertolini said at a January healthcare conference that raising wages would partially offset the $120 million in turnover costs it accrues every year.
“Most of these companies are motivated by the desire to reduce that turnover rate to a number that is more affordable to them,” Burtless said.
Some researchers suggest upping wages isn't just a sound business decision; it also benefits public health. For example, Paul Leigh, a health economist at University of California, Davis, and a colleague found “negatively and strongly statistically significant effects of wages on hypertension,” especially for women. He's also conducted work that found low pay is more likely to increase the prevalence of obesity.
Because healthcare represents about one-sixth of the U.S. economy, Leigh said it would “be nice to have some of that spread around” to the low-wage earners such as aids, orderlies and nursing assistants. “If there's one thing that helps so many of us, it's a thriving economy, a booming labor market,” Leigh said. “That's great for economic health and public health.”
Despite the tightening job market and falling unemployment rate, take-home pay for most low- and moderate-income Americans has not budged much in recent years. The average hourly earnings of nonsupervisory employees were $20.80 in February 2015, according to the most recent Labor Department statistics. That was about 1.6% higher than the same period last year. For the health services and education sector, average hourly earnings were $21.93, or a 1.8% wage growth rate.