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The Impact of a Large Wage Increase on the Workforce Stability of IHSS Home Care Workers in San Francisco County

Introduction

The primary concern of this study is to examine the impact of the nearly doubling of wages over a 52-month period on workforce stability the In-Home Supportive Services (IHSS) workforce in San Francisco County.3

The San Francisco Board of Supervisors approved a Living Wage Ordinance in August 2000 that was to take effect the following October. Under the Ordinance the city was required to pay at least $9 an hour to any employee who worked on a county service contract or who worked on city property. The stated purpose of the Ordinance was to lift the targeted workers to self-sufficiency and improve the quality of the services provided to the city’s residents.

It is difficult to separate the effects of the Living Wage Ordinance, which was supported by a coalition that included the union, and the effects of union bargaining with the Public Authority. Wages for IHSS workers began to rise significantly above the state minimum wage a full two years before the Living Wage Ordinance was passed. This study, therefore, examines the impact of the wage increase – due to both with bargaining and the Living Wage Ordinance -on the stability of the IHSS workforce and the standard of living of the workers. This study also provides an estimate of the net cost of the wage increase to San Francisco County, to the state of California and to the Federal Government. A forthcoming paper co-authored with Laura Reif will examine in greater detail the link between workforce enhancements and quality of service provided, though some preliminary results are reported here.

The study examines the impact of a wage increase only on the homecare workforce that provides publicly funded services in California; however, it has broader applicability to the private homecare workforce as well. This paper and further analyses using this database will have very important implications for scholars and practitioners in other direct care industries, including home health care, day health care, residential care facilities and perhaps even hospitals. All of these direct care services employ low-wage, frequently immigrant workers, and all are afflicted in varying degrees by very high rates of turnover, labor shortages and quality problems. This study is one of the very few large-scale empirical investigations of the effect of wages on labor market outcomes in any direct care industry, and possibly the only such study specifically addressing conditions in the homecare industry.4

The project is based on a unique database, which matches approximately 18,000 San Francisco County homecare workers in 26,115 unique matches to 15,500 service recipients between November 1997 and February 2002. In any given month the number of matches averaged about 8,600.

This paper is intended for a broad audience rather than for specialists in labor economics or in gerontology and health economics. As such, it will provide a broad brush discussion of the institutional context in which the wage increase occurred and a set of stylized facts that roughly report the consequences of the wage increase for poverty and labor market stability. Because the workforce is largely poor and a significant proportion is foreign-born, the institutional context and specifically the effect of immigration law and welfare policies must be factored into any analysis of outcomes. Thus part of the paper will be concerned with how these policies shape labor market responses in this industry.

The paper also eschews the use of econometrics, both in the interests of reaching a broad audience initially, and secondly because much of the institutional detail would be obscured by econometric analysis. A later paper, however, will employ econometric techniques in order to better measure the relative importance of the independent variables affecting the labor market outcomes.

The principle conclusions of the study are:

There was a 54 percent increase in the number of IHSS workers over the four-year period of the study.

Possibly because the wage increase and/or the addition of health benefits made it easier for consumers to hire an acceptable provider, the number of consumers increased by 47 percent over the same period.

The number of hours worked per provider increased significantly for non-family providers in some ethnic groups.

The annual turnover rate of matches between consumer and provider fell by 6 percent; adjusted to eliminate the turnover of matches that may end for natural reasons, the annual “bad” turnover rate of matches fell 20 percent.

The annual turnover rate of the workforce fell 17 percent, but adjusted to measure only “bad turnover,” the rate fell by 30 percent.

The proportion of consumers matched to a provider of their own ethnicity –which is a measure of the quality of match- rose 6 percent.

A rough calculation shows the wage increase could have reduced the number of people living below the poverty line in San Francisco by as much as 15 percent, other things being held constant.

By 2001, the IHSS program was bringing in $114 million in income every year to San Francisco, compared to $37 million in 1997, at a gross cost to the county of $18 million and possibly a net cost of as low as $8 million. That would mean every dollar spent by the county brought an additional $13 in income from state and federal sources to very poor San Francisco communities.

The paper will first provide some background on IHSS and the economic events that would affect labor market outcomes during the period under study. Section 2 provides a brief overview of the labor force at the beginning of the period of study. Section 3 discusses the predicted effects of a substantial wage increase. In section 4, I discuss the scope and methods of the study. In Section 5, I discuss the labor market and quality of service outcomes, the impact on poverty and an analysis of the net cost of the wage increase. Section 6 concludes the paper.