Home Economy Home health care on front line of proposed $15 minimum wage

Home health care on front line of proposed $15 minimum wage

To understand what’s at stake if New York adopts a $15 minimum wage, consider home care agencies.

The agencies assist elderly, handicapped and chronically ill people, and enable them to remain independent at home. The services cut health care costs by keeping patients out of more expensive nursing homes and hospitals.

Most clients are covered by Medicaid. But funding has not increased in recent years, so as costs have gone up company profits have been squeezed.

“We don’t control our monies,” said Sasha Guillaume, CEO of Mrs. G’s Services, a Port Chester home care agency that serves about 600 clients in New York City, the Hudson Valley and Long Island. “If we don’t get additional funds, everything will become extremely difficult.”

MaryEllen Gibbs is a home care companion who makes $10 an hour. Last year, including overtime, she cleared $24,000. That’s not enough, she said.

Her rent has doubled in the past decade but her wages have barely budged. She depends on friends to help occasionally with rent, phone bills and keeping the electricity on in her $1,510 a month Riverdale apartment.

“I’m living paycheck to paycheck,” she said. “I can’t keep going back to my friends.”

The realities of the home care industry reflect two different economic views that could soon be tested in New York.

Gov. Andrew Cuomo has proposed raising the minimum wage to $15 from $9, to be phased in over three years in New York City and over five years in the rest of the state. Cuomo and legislative leaders are secretly negotiating the issue as they close in on April 1, the beginning of the state’s fiscal year.

The expected effects of a $15 minimum wage depend on one’s economic philosophy.

Progressive economists frame the issue from the point of view of workers. Federal and state minimum wages have not kept pace with inflation, so buying power has eroded. At $9, or $18,720 a year for a full-time employee, a single parent with two children earns less than the official poverty line.

The progressive economists believe that higher wages make workers more productive and less likely to leave their jobs. Their extra earnings are plowed back into the economy as they buy basic products and services they couldn’t afford before.

Traditional economists frame the issue from the point of view of employers and consumers. As wages increase, prices for products and services increase. Some companies, especially larger ones, will absorb the higher costs. Others will make ends meet by reducing hours, switching to automation or firing workers. Some businesses will fail.

Cuomo is clearly in the progressive camp. He describes the minimum wage as a social compact and he harkens back to Franklin Roosevelt, who enacted the first federal minimum wage, 25 cents an hour, in 1938.

A full-time worker “should be able to stay out of poverty, take care of their family and live with dignity and respect,” he said in his 2016 State of the State policy book.

He declared that $15 an hour will lift 110,000 families out of poverty, directly benefit 2.3 million workers — about a quarter of the workforce — boost the economy by $15.7 billion and have no discernible effect on the number of jobs.

The Business Council of New York State foresees very different outcomes. It estimates that $15 an hour will cost 200,000 to 600,000 jobs, according to Zack Hutchins, director of communications. The hardest hit will be companies upstate, where the economy has not fully recovered from the Great Recession and mom-and-pop Main Street enterprises that will have less ability to absorb costs or adapt.

“This will hurt working people,” he said.

While economists debate the overall effects, they tend to agree that the impacts will vary from region to region and industry to industry.

The restaurant, retail and health care and social assistance industries rely heavily on low-paid workers. About one in five fast-food restaurants in New York are likely to close under a $15 minimum wage, according to a survey last year of more than 900 restaurants by the Employment Policies Institute in Washington. Nearly half of the businesses said they would reduce employee hours or staffing, and more than two-thirds would raise prices.

The scale of Cuomo’s proposal makes it difficult to assess. Moderate increases in the minimum wage, according to some economic studies, have had little or no effect on jobs or hours worked. But Cuomo’s proposal would increase the minimum wage by 67 percent in three to five years. That’s on top of an increase to $9 at the end of last year, from $7.25 in 2013.

That’s why the home care industry, where even a 25-cent per hour wage increase is hard to absorb, is wary of Cuomo’s proposal.

“We do not oppose a $15 minimum wage,” said Claudia Hammar, president of the New York Association of Health Care Providers. “The crux of the issue is funding.”

Home care agencies in Westchester County are typically reimbursed $16.80 to $19.09 an hour for personal care services. The prevailing wage for aides is $10, plus $3.22 in supplemental benefits. That leaves less than $4 to $6 to pay for the nurses they report to, travel, overtime, training, workers compensation, and other operating costs.

The association estimates that the increased minimum wage will cost home care businesses $239 million in the first year, according to Laura Haight, vice president of public policy, and $2.2 billion when fully phased in in the fifth year.

With profit margins at 1 to 2 percent, she said, there is no room to absorb more costs without a corresponding increase in Medicaid payments. The union that represents health care workers agrees that state Medicaid funding should be increased. But it has calculated lower costs: $200 million in the first year and $500 million by the fifth year, according to Helen Schaub, director of policy and legislation for 1199SEIU United Healthcare Workers East.

The state and federal government split Medicaid costs evenly. Schaub said the federal government would probably adjust its rate if New York increases its share.

At the employee level, Gibbs said, an extra $5 an hour would help her pay bills without relying on the kindness of friends. And at age 56, she could start cutting back from the 60 to 70 hours a week she tries to work. “I could relax more.”

“They should be paid more,” said Guillaume, the head of Mrs. G’s Services, who employs 460, mostly part-time workers. He said home care work is stressful emotionally, mentally and physically, but he needs more Medicaid funding to make the pay raises work.

Increasing the minimum wage could have a perverse effect, he said. That’s because home care workers already are paid above the current minimum wage. If employees in less stressful jobs make the same as home care workers, his workers will leave the business.

If you have a choice between flipping burgers and cleaning up people, he said, “most will choose to flip burgers.”

Haight said agencies will merge and some will close and patients will suffer.

“We could see the collapse of the New York City home health care industry this year,” Haight said. Agencies in Westchester and the rest of the state would begin to feel the impact by the second year.

Cuomo’s proposed budget does not factor in additional funding for Medicaid reimbursements. The Democratic-controlled Assembly supports the minimum wage and has proposed a $200 million boost for Medicaid services. The Republican-led Senate did not include a minimum wage increase in its budget proposal.

Under New York’s “three men in a room” budget process, whereby the governor, Assembly Speaker Carl Heastie and Senate majority leader John Flanagan negotiate in secret, the public probably won’t know until April 1 whether New York will become the first state in the nation to enact a $15 minimum wage.

“It’s all rumors at this point,” Haight said. “Unless you are in that room you don’t know what’s happening.”

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