Proposed health care minimum wage increase: State costs would be offset by reduced reliance on the public safety net by health workers and their families

Press Coverage


California Senate Bill 525 proposes a minimum wage increase for health care workers at most medical facilities—general and surgical hospitals, psychiatric hospitals, outpatient clinics, offices of physicians, skilled nursing facilities, and home health agencies—starting at $21 per hour on July 1, 2024, and phasing up to $25 per hour on July 1, 2025. This health care worker minimum wage would replace the current state minimum wage of $15.50 per hour, increasing the incomes of approximately 450,000 low-wage health care workers and their families by more than $10,000 annually once the minimum wage reaches $25 per hour.

This brief updates key findings from an April 2023 Labor Center brief by Lopezlira and Jacobs reflecting amendments to SB 525 in May 2023. While the earlier brief focused on the effect of the proposal on health care workers, patients, and industry, here we also consider its impact on the state budget. We estimate both the new costs to the state resulting from SB 525 as well as the savings it would generate through reductions in safety net program enrollment of affected workers and their family members.

  • Almost half (48.8%) of families with a health care worker affected by the proposed minimum wage increase are enrolled in public safety net programs, including Medi-Cal, CalFresh, CalWORKS, and the Federal Earned Income Tax Credit. Raising the health care minimum wage would help reduce these working families’ need to rely on public safety net programs, in turn reducing state Medi-Cal spending as affected workers become eligible for federally-subsidized insurance through Covered California.
  • Medi-Cal caseload savings would partially or fully offset state cost increases related to potential increased Medi-Cal payments to providers and increased costs for state employee wages and benefits. By the third year of the policy, the net state budget impact of the bill is estimated to range from $467 million in net savings to $303 million in net costs (2023 dollars), depending on the extent to which the state increases Medi-Cal provider payments and how many workers and dependents experience a change in health insurance eligibility.

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