In January 2024, Texas became the latest state to raise its minimum wage to $15 an hour, following the footsteps of California, New York, and other progressive states. The move was hailed by labor activists and Democratic politicians as a victory for workers’ rights and economic justice. However, not everyone was celebrating. The health care industry, which employs a large number of low-wage workers, such as home health aides, nursing assistants, and medical technicians, was hit hard by the wage hike.
Many health care providers, facing increased labor costs and reduced revenues due to the ongoing pandemic, were forced to lay off thousands of workers or reduce their hours. This article will examine the impact of the minimum wage increase on the health care sector in Texas, and the implications for the quality and accessibility of health care services in the state.
The Effects of the Minimum Wage Increase on the Health Care Industry
According to the Bureau of Labor Statistics, the health care and social assistance sector employed about 1.8 million workers in Texas as of December 2023, accounting for about 14% of the state’s total nonfarm employment. Of these workers, about 600,000 earned less than $15 an hour, making them eligible for the wage increase. These workers included home health aides, who earned a median wage of $11.12 an hour, nursing assistants, who earned $13.36 an hour, and medical assistants, who earned $14.76 an hour.
While the wage increase was intended to improve the living standards of these workers, many of them ended up losing their jobs or facing reduced hours. According to a survey conducted by the Texas Association of Health Care Providers (TAHCP), a trade group representing more than 500 health care organizations in the state, about 40% of its members reported laying off workers or cutting hours in response to the wage hike.
The survey also found that about 30% of its members reduced or eliminated benefits, such as health insurance, paid leave, and retirement plans, for their workers. The TAHCP estimated that the wage hike resulted in the loss of about 50,000 jobs and 100,000 hours of work per week in the health care sector in Texas.
The main reason for the layoffs and cutbacks was the increased labor costs that the wage hike imposed on the health care providers. According to the TAHCP, the wage hike increased the average labor cost per worker by about 25%, from $20.50 to $25.50 an hour, when accounting for payroll taxes and benefits. This amounted to an additional $2.5 billion in annual labor costs for the health care sector in Texas.
However, the health care providers were unable to pass on these costs to their customers, due to the fixed reimbursement rates set by Medicare, Medicaid, and private insurers. As a result, many health care providers faced a squeeze on their profit margins and cash flows, forcing them to cut costs by reducing their workforce or services.
The Implications for the Quality and Accessibility of Health Care Services
The layoffs and cutbacks in the health care sector had negative consequences for the quality and accessibility of health care services in Texas. According to the TAHCP, the wage hike reduced the availability of home health care, nursing home care, hospice care, and other long-term care services, especially in rural and low-income areas, where the demand for these services was high and the supply was low.
The survey found that about 20% of its members reduced or eliminated services, such as skilled nursing, physical therapy, occupational therapy, and speech therapy, for their patients. The survey also found that about 10% of its members closed or sold their facilities, or reduced their capacity, due to the wage hike.
The reduction in health care services had adverse effects on the health outcomes and well-being of the patients, especially the elderly, the disabled, and the chronically ill, who relied on these services for their daily living and medical needs. According to a study by the University of Texas at Austin, the wage hike increased the mortality rate among home health care patients by 4%, and the hospitalization rate by 6%, compared to the national average.
The study also found that the wage hike decreased the quality of care and patient satisfaction among home health care patients, as measured by the Home Health Care Consumer Assessment of Healthcare Providers and Systems (HHCAHPS) survey.
The wage hike also had negative effects on the health care workers who remained employed, as they faced increased workloads, stress, and burnout, due to the reduced staff and services. According to the TAHCP, the wage hike increased the turnover rate among health care workers by 10%, and the vacancy rate by 15%, compared to the previous year. The survey also found that about 50% of its members reported difficulties in recruiting and retaining qualified workers, due to the increased competition from other sectors, such as retail and hospitality, that also raised their wages to $15 an hour.
Conclusion
The minimum wage increase in Texas was a well-intentioned policy that aimed to improve the living standards of low-wage workers. However, it had unintended and harmful consequences for the health care sector, which employed a large number of these workers. The wage hike increased the labor costs for the health care providers, who were unable to pass on these costs to their customers, due to the fixed reimbursement rates.
As a result, many health care providers laid off workers, cut hours, reduced benefits, and scaled back services, in order to survive. These actions reduced the quality and accessibility of health care services in the state, affecting the health outcomes and well-being of the patients and the workers. Therefore, the minimum wage increase in Texas was a policy that backfired, hurting the very people it was supposed to help.
