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Raising the Minimum Wage Won’t Shut Down Nursing Homes

February 26, 2014 By Nicole Simms, Fellow

Those hesitant or opposed to raising the minimum wage claim it will result in job loss and business failure; in particular, they frequently express concern it will have an adverse effect on nursing homes, causing some to go out of business. These accounts fail to consider that raising the minimum wage to $9.50 will only increase the wages of a small proportion of nursing home workers, and that such an increase may actually help nursing homes stay in business by attracting workers to understaffed facilities – especially those in rural areas.

Since some nursing home workers do make under $9.50/hr, it is indeed the case that raising the minimum wage to $9.50 would require nursing homes to pay out more in wages. But what kind of an impact would this have on workers, nursing homes, and the elderly residents and people with disabilities who depend on them?

Minnesota 2020 visited the relationship between nursing homes and minimum wage a few months ago with a guest commentary from SEIU Healthcare Minnesota’s Lisa Weed. I wanted to build on Weed’s analysis to consider how an increase in the minimum wage to $9.50 might impact nursing home workers in different parts of the state. Using information from 2012 kindly provided by the Minnesota Department of Employment and Economic Development (DEED), I was able to determine significant regional disparities in the numbers of nursing home workers making under $9.50.

First, some notes on my analysis are called for. The 2012 numbers Lisa Weed used from DEED to calculate the number of nursing home workers currently making under $9.50 come from the UI Wage Records, which are continually updated as information is added by employers. I have therefore based my calculations on the newest numbers for 2012.

Also, DEED provides a wage breakdown that makes it impossible to precisely determine the numbers of people making under $9.50/hr. Wages are categorized in $0.50 increments.

Of the 53,470 people working in Minnesota nursing homes, at least 2,579 make up to $9.00/hr. These 2,579 individuals constitute approximately 4.8% of all nursing home workers. When we include those making up to $9.50/hr, we get 4,240 individuals – 7.9% of all nursing home workers.

A closer look reveals that of these individuals, approximately 16% make $7.50 or less, 7% make between $7.51 and $8.00, 13% make between $8.01 and $8.50, 25% make between $8.51 and $9.00, and 39% make between $9.01 and $9.50.

Increasing the minimum wage to $9.50/hr will therefore result in a $0.00 - $1.50 raise for the majority of nursing home workers who qualify – about 3,264 individuals (only 1,604 workers would definitely get a wage increase, since some of the rest already make $9.50). The other 975 individuals who make $8.00 or less will receive marginally larger raises. It’s important to note that some of the individuals in this latter category are trainees who currently make a training wage of $4.90. While their wages will likely increase with an increase to the minimum wage, trainees wouldn’t be eligible to receive $9.50/hr – an increase to $8.00/hr for trainees is being advocated.

All told, these modest increases won’t drain the finances of nursing homes, but they will give workers more money to put towards things like rent and groceries. And every dollar more they have to spend is a boost to their local economies.

Speaking of local economies, let’s consider some of the regional differences in wages for nursing home workers. Back in the 1990s, Minnesota was divided into six Planning Areas based on things like industry distribution and commuting patterns: Northeast, Northwest, Central, Southwest, Southeast, and the Twin Cities 7-County Metro Area.

Data on nursing home worker wages for these six Planning Areas is the most detailed level available. Based on the 2012 data, Central has the highest percentage of nursing home workers making $9.00 or under/hour at 8.4%; the Twin Cities Metro Area has the lowest at 1.7%. The percentage of nursing home workers making up to $9.00/hour in the other four Planning Areas ranges from 6.1%-6.8%. If we include the group making up to $9.50, Central continues to see the highest percentage at 12.9%, and the Twin Cities the lowest at 3.2%. Some of the Planning Areas from that middle group (which range from 8.7%-12%) swap places, but those in the top three and bottom three remain the same under both scenarios.

I looked at a number of variables and determined that Planning Areas with higher percentages of nursing home workers making under $9.50/hr have lower per capita and household incomes, higher poverty and unemployment rates, are more rural, and have a larger percentage of individuals in all fields making under $9.50/hr. These are areas that stand to benefit the most from a boost in wages.

But the kind of modest wage boost we’re talking about simply won’t shut down nursing homes. Nursing homes shut down because they can’t keep up with infrastructure improvements, huge state or federal funding cuts make it impossible for them to carry out their operations, or they have difficulty attracting and retaining staff. This latter problem recently resulted in a nursing home being shut down in Hoffman, MN – despite spending thousands on advertising, administrator Bill Brewer could not draw enough staff to be able to fill the home to capacity, which made it difficult to balance finances. Increasing wages may actually help prevent shut-downs by attracting workers to jobs in nursing homes (a particular challenge for rural facilities). And at least some of the money to pay for increased wages is already in place: a recently passed health and human services budget bill increases funding for nursing homes and other long-term care facilities over a two year period. A portion of that is dedicated to helping increase salaries.

Let’s put a human face on all these numbers. Who are the people working in nursing homes who may be making less than $9.50/hr? They are the nursing aides, orderlies, and attendants, the custodians, the groundskeepers, the cleaners, the laundry workers, the food makers and servers. They are the people that keep nursing homes running; the people who make it possible for our loved ones to receive care when they need it most.

Research indicates care for the elderly is changing. More and more elderly Minnesotans are staying in their homes, or residing in assisted living facilities. Nursing homes are being increasingly used on a temporary basis, for rehabilitation, recuperation, or end of life care. This means our loved ones need nursing homes and their workers in some of their hardest moments. They take care of us; taking care of them means supporting an increase in the minimum wage.

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6 Comments:

  • Mike Downing says:

    March 3, 2014 at 5:39 pm

    No, increasing the minimum wage won’t shut down nursing homes. It’ll just increase the costs of a nursing home from $6000/month to $7000/month…

  • Public Policy Project says:

    March 10, 2014 at 8:59 pm

    I like your blogs and how you report on public policy issues affecting low-income communities and the poor. Keep us posted on what is happening. Thanks.

    James Trice
    Founder and CEO
    Public Policy Project

  • Matt says:

    April 19, 2014 at 12:34 pm

    So… If I was making $9.50/hr, and I started at $8 and worked my way up, and now they start everyone at $9.50 and now I’m getting minimum wage, is my work ethic going to go down because I no longer feel like a valued employee?

    • Dan Conner says:

      April 30, 2014 at 9:25 am

      Matt, I think your $8 wage, obviated by the increase in minimum wage to $9.50 could very easily be handled through collective bargaining.  That would be handle, if you were member of a union.  However, if you aren’t a member of a union, then you need to negotiate with the employee yourself.  If your employer feels you are worth it, he/she will pay you more.  If not, welcome to capitalism.

      • Matt says:

        April 30, 2014 at 10:30 am

        I had a job for 5 years, I started at $7.25 and worked my way up to $10.50 after 5 years. The warehouse crew had a union, but those of us that worked offsite didn’t. Our group spent over a year finding out if a union was in our best interest, but after seeing what we had to pay for dues, the benefits that we got out of it, and the fact the union guy lied to us, we decided to vote it down.

        The first summer I started, they bumped up starting from $7.25 to $7.75 and I didn’t get an automatic raise(I did get a 90 day review and raise, but that just put me at starting again). I had to raise a big stink and finally got a “merit” raise.


        I had another job and worked there for 7 years and moved from $9 to $18/hr. I was doing some extra work on the side and ended up making $60k last year. I don’t even know what to do with all that money. I lost my job, and now just live on the side job making about $40k/yr.

        I don’t really have to think much about trying to make money, and wonder if there are others like me. Pay them too much, they save up a ton of money, and soon find going to work is pointless

        When I was making $8.68/hr, get this: I bought a house.

        This was 2003, sure my mortgage was 45% of my income, but 11 years later, I’m still in it, and never fell behind on payments.

         

        • Dan Conner says:

          April 30, 2014 at 2:03 pm

          Matt, well then I can echo what I said earlier…welcome to capitalism.