Minimum Wage Hikes to Have Ripple Effect in Senior Living

Minimum wage hikes recently approved in California and New York mean that workers will soon earn $15 an hour, but the associated costs and implications put pressure on pay across the board for senior living providers.

“What everybody forgets is that this change pushes up against everyone else’s pay in the organization,” Michelle Esser, vice president of talent management and human resources for be.group, tells Senior Housing News. “It’s not just a minimum wage change.”

More than 440,000 health care workers in the state of California alone will see their pay go up gradually after Gov. Jerry Brown signed legislation authorizing the path to $15 an hour by 2022. And in New York, home care and health care workers celebrated the state Legislature’s budget agreement to boost minimum wage after much pushback from the health care industry itself. Senior living providers across the country have kept their eyes on these states amid a nationwide movement for $15 minimum wages.

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While it’s hard to begrudge employees making more money, there’s no denying the expense of such wage hikes, Esser says.

Of 1,160 people employed by be.group, 88.7% earn hourly wages, she says. Currently, be.group serves nearly 4,000 residents across 34 communities, including low-income housing, skilled nursing, assisted living, independent living and other types of care, until the completion of a $1.5 billion merger with not-for-profit American Baptist Homes of the West (ABHOW).

The last time be.group bumped its minimum wage, it cost the company roughly $400,000, Esser says. Only $177,000 of that stemmed directly from increasing base pay, though, as the rest came from 2% adjustments to other employees’ salaries.

Under the California legislation, the state’s $10 hourly wage will jump to $10.50 beginning in 2017 and $11 an hour in 2018. From there, workers will see a $1 increase annually until 2022.

There’s no tried and true formula as to where that money comes from for employers like be.group, either. Whether it’s passing costs on to residents or not getting an initiative completed, “something has got to give somewhere” to absorb the difference in costs, Esser says.

“It colors everything that we do,” she says. “I’ve never been in a climate like this where it’s affecting the entire organization and at the top of everyone’s mind.”

The company has always tried to stay above the mandated rate, Esser says, but that might not be possible moving forward. And she fears that organizations will begin to hire less people, instead piling the amount of work previously handled by three people onto two employees.

Medium-sized not-for-profit senior living providers will be hit the hardest, Esser predicts, especially if they have continuing care retirement communities (CCRCs), as it can already be tough to attract the small percentage of residents who can afford buy-ins associated with such senior housing.

“If our cost to the resident is going to go up, it makes that percentage even smaller,” Esser says. “Either that, or the industry needs to rethink how we’re doing things.”

On the other side of the country in New York, the Healthcare Association of New York State estimated the uptick in wages could cost hospitals, nursing homes and home care providers $2.9 billion if implemented in 2021, according to Modern Healthcare.

Written by Kourtney Liepelt

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