Proposed health care minimum wage increase: What it would mean for workers, patients, and industry

Enrique Lopezliraand Ken Jacobs

Press Coverage

Executive Summary

The proposed California Senate Bill No. 525 (SB 525) would establish a new $25 per hour minimum wage for health care employees working at various medical facilities in the state to replace the existing state minimum wage of $15.50 per hour for these workers. A $25 health care minimum wage would lead to a significant boost in the earnings for low-wage health care workers and their families.

The COVID-19 pandemic significantly impacted the health care sector in California. The mental and physical toll of the pandemic resulted in high turnover rates, exacerbating existing retention and recruitment challenges in the industry.

The low wages paid to health care support workers, direct care workers, and health care service workers in California means they struggle to meet their basic needs; these low wages also significantly contribute to the difficulty in maintaining adequate health care staffing across the state. Staffing shortages impact patient care, leading to increased wait times, longer hospital stays, and inadequate treatment of chronic illnesses.

The proposed policy would result in significant benefits to workers and their families. We estimate that over 469,000 workers would be affected by the wage increase, including over 50,000 workers who currently earn slightly above $25 an hour but would receive a pay increase to maintain their pay premium. Affected workers would receive an average wage increase of over $5.74 per hour, or about a 30% increase in pay.

The proposed pay increase would disproportionately benefit workers of color, who represent 70% of affected workers; and women, who make up three out of four affected workers. The majority of affected workers are the primary income providers in their households. Close to half have children.

The higher wages collectively represent 1.3% of personal health spending in the state. While there is large variation across types of facilities, the wage increases would raise operating costs by about 3%. These estimated impacts on health expenditures do not consider additional savings from higher productivity of health care workers.

There is ample research linking higher pay, reductions in worker turnover, and improved staffing levels to better quality of care for consumers. Increasing pay to health care workers can be expected to improve patient outcomes, including shorter hospital stays and lower mortality rates.

Therefore, as this report shows, the proposed minimum wage has the potential to substantially improve conditions for low-wage health care workers that provide essential services to the state; to ameliorate staffing shortages in the industry; and to improve quality of care.

Read the full report.