Nursing Home Staff Will See Minimum Wage Increase to $25 Per Hour in California

States continue to take action on addressing wage disparities for nursing home staff even as the industry undergoes massive shifts marked by economic, operational and regulatory changes.

Skilled nursing facility staff, as well as other health care workers in California, will slowly see their hourly wage increase to $25 over the next decade under a new law signed by Gov. Gavin Newsom on Friday.

The wage increase is the result of years of lobbying by labor unions, which have “significant sway” in the state, according to the Associated Press. The move comes on the heels of Gov. Newsom raising the minimum wage for fast food workers to $20 per hour.

“The California Association of Health Facilities (CAHF) supports efforts to increase wages for the individuals who care for our most vulnerable populations. However, the workforce crisis continues for skilled nursing facilities that struggle to find workers and keep their doors open,” Corey Egel, director of public affairs at CAHF, said in an email to Skilled Nursing News.

The association hopes legislators in the state make “meaningful and long-lasting” investments in the long-term care sector’s workforce.

And the passage of the minimum wage in California comes against the backdrop of a proposed federal nursing home staffing mandate, which would require many facilities to hire more workers. While wage increases could help recruitment and retention of workers in SNFs and other settings, nursing home operators point to the lack of funding to support such increases.

The proposed federal mandate could cost nearly $7 billion per year and is essentially unfunded, according to a recent analysis from the American Health Care Association (AHCA) and CliftonLarsonAllen (CLA).

In 2022, California nurse aides earned an average of $20.38 per hour across the health industry, according to the state Employment Development Department (EDD). Total nursing average hourly wages increased 14.7% in 2022 compared to increasing 8.8% in 2021 and 7.4% in 2020, according to data from CliftonLarsonAllen (CLA).

Patient per day (PPD) costs have increased 15% in the past three years, CLA added. The largest expense item for any SNF is labor, researchers for CLA said, but that varies greatly from state to state. Generally, states with higher increases in PPD costs are experiencing a combination of higher wage inflation and greater use of contract labor.

Operators meanwhile faced a negative-3.6% operating margin as of 2022, on average, worsening from negative-0.6% once the public health emergency ended last May, CLA noted.

With regard to the California minimum wage measure, the health care industry and labor unions in the state had been working to come up with a compromise on the matter in the final days of the legislative session. The timing of the bill being signed by Newsom effectively preempts ballot initiative campaigns, AP said.

And, unions expect increased wages will allow some workers to leave the state’s Medicaid program, along with other government support programs for food and expenses. Almost half of low-wage health care workers have had to use these publicly funded programs, according to a study by the University of California, Berkeley Labor Center.

Legislators say savings from fewer health care workers on state programs will help offset costs of rising wages.

The law preempts moves by several city councils in California to raise the minimum wage for health care workers.

“Californians saw the courage and commitment of health care workers during the pandemic, and now that same fearlessness and commitment to patients is responsible for a historic investment in the workers who make our healthcare system strong and accessible to all,” Tia Orr, executive director of the Service Employees International Union (SEIU) California, said in a statement to AP.

The new wage increases have been a major point in negotiations between Kaiser Permanente and labor unions, which represent about 75,000 workers, AP said. Kaiser workers went on strike for three days last week; both sides reached a tentative deal on Friday.

In comparison, Minnesota in May passed a bill to create a regulatory board tasked with setting compensation levels in nursing homes after declining to increase wages. Board members were finalized and met for the first time last month. The Board will adopt its first rules by Aug. 1, 2024 which will become effective January 2025, according to LeadingAge Minnesota.