RELEASE: 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

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The cost to State of a proposal to raise California health care minimum wage would be offset through reduced safety net spending for workers and their families

UC Berkeley Labor Center finds that almost half of low-wage health workers and their families receive safety net benefits

Berkeley, CA–A new UC Berkeley Labor Center policy brief finds that the state cost of a proposed $25/hr minimum wage for health workers would be offset through reduced safety net spending on those workers and their families. Researchers found that almost half of low-wage health workers and their families rely on one or more safety net programs, including Medi-Cal, CalFresh, CalWORKS, and the Federal Earned Income Tax Credit. Raising the health care minimum wage to $25/hr would help reduce these working families’ need to rely on safety net programs, thereby reducing state Medi-Cal spending as many affected workers become eligible for federally-subsidized insurance through Covered California.

Medi-Cal caseload savings would partially or fully offset increased state costs for employee wages and benefits, as well as costs due to potential increased Medi-Cal payments to providers, arising from the minimum wage policy change. 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.

“We were surprised to find such high Medi-Cal enrollment among health care workers who would benefit from this policy. It is a clear demonstration of how little many of the jobs currently pay,” said Laurel Lucia, one of the brief’s authors and director of the UC Berkeley Labor Center’s Health Care Program.

“The cost to raise the health care minimum wage would represent only about 1% of overall health care spending in California,” said Enrique Lopezlira, a co-author of the brief and director of the UC Berkeley Labor Center’s Low-Wage Work Program. “There is ample evidence linking better wages to better patient care.”

Joshua Gray, an environmental services technician at Enloe Medical Center in Chico, says that relying on public assistance is not a substitute for better wages.

“Many health care workers can’t afford to make ends meet and must rely on housing and food assistance. That’s why so many are leaving health care jobs for better-paying ones,” said Gray. “With so many workers leaving, those of us who remain are still doing the jobs of two or three people. Our patients deserve better than severely understaffed hospitals.”

More than 450,000 health care workers would benefit by the time the proposed health care minimum wage rose to $25/hr in July 2025 under SB525, now before the California legislature. That number represents 40% of all health care employees in the state and 3% of California’s total workforce. The vast majority of affected workers are from outpatient clinics, hospitals, skilled nursing facilities, and home health agencies.

This brief updates key findings from an April 2023 Labor Center brief focusing on the effect of the proposal on health care workers, patients, and industry. That brief found that many California health care workers do not earn enough to make ends meet and that an increase in wages would help address worker shortages, turnover, and morale and improve patient care.