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California’s New Minimum Wage Law for Health-Care Workers: A Catalyst for Change
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The recent enactment of a groundbreaking California law, which significantly raises the minimum wage for health-care workers, is poised to catalyze similar movements for higher pay in other states. Workforce experts and legal advisors guiding health systems emphasize that wage hikes must be coupled with additional policies to combat the persistent shortage of health workers throughout the nation.

California’s Minimum Wage Boost

On October 13, California Governor Gavin Newsom signed into law Senate Bill 525, which mandates an increase in the minimum wage for healthcare workers. Starting in the upcoming year, large health systems and dialysis clinics in the state will be required to pay a minimum of $23 per hour, with incremental increases leading to a $25 per hour minimum wage by 2026. However, these wage hikes will be phased in more gradually for certain hospitals and rural healthcare facilities. This legislation coincides with the U.S. Bureau of Labor Statistics projection of 194,500 annual job openings for registered nurses until 2030, including around 8,000 openings annually for community health workers.

Union-Led Reform

The Service Employees International Union’s (SEIU) California division was pivotal in advocating this landmark law. The SEIU believes these wage increases will help alleviate the staffing shortages adversely affecting patient access to quality healthcare. Their estimates suggest that over 400,000 health-care workers in California will receive pay raises due to this phased approach.


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Potential Ripple Effect Across States

The California law’s pioneering approach has the potential to inspire other states to pursue similar, health-care-specific minimum wage increases. Legislation pending in Massachusetts, in the form of House Bill 1877 and Senate Bill 1203, seeks to set a higher minimum wage for hospital and health clinic workers at 150% of the regular statewide minimum wage, equivalent to $22.50 per hour based on the state’s current minimum wage of $15.

Before the statewide measure in California was enacted, the SEIU successfully lobbied for local ordinances in several cities, establishing higher minimum wages for healthcare workers. In November 2022, voters in Inglewood, California, approved a ballot question establishing a $25 minimum wage for certain workers in private-sector hospitals and clinics. Similar ordinances had been passed by city councils in Los Angeles and other areas in 2022 but were delayed by the hospital industry, which sought a ballot referendum instead.

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Strains on Health Facilities and Funding

The push for higher wages coincides with ongoing financial pressures and labor cost challenges faced by community health centers and smaller health facilities, which have yet to recover fully from the economic disruptions caused by the COVID-19 pandemic. Legal advisors for these health facilities warn that shifting the burden of increased labor costs onto health-care facilities may lead to unintended consequences, such as facility closures or bed reductions due to unsustainable labor costs.

A coalition of health-care providers, initially opposed to the California measure, eventually reached a compromise with the SEIU to implement the wage increases incrementally. However, smaller providers continue to express concerns about the legislation’s impact. In an op-ed, Craig S. Castro, the President and CEO of California’s Community Health System, voiced concerns that the minimum wage measure comes as an additional financial strain for hospitals already grappling with economic challenges.

The California law does allow certain health-care facilities to request waivers, citing potential financial hardships stemming from higher minimum wages.

Beyond Wages: Long-Term Solutions for the Health Workforce

Recognizing that wages alone are insufficient to address the healthcare workforce shortage, policymakers in other states and nationwide organizations are exploring multifaceted solutions. The aim is to enhance workforce retention in the healthcare sector.

In New York, policymakers are developing a comprehensive strategy to retain healthcare professionals, encompassing financial support for healthcare education, expanding training capacity in medical institutions, and creating a model for training “universal” long-term care workers who can transition across caregiving roles.

The National Council of State Boards of Nursing is also concerned about addressing staffing shortages. Their 2022 workforce study predicts that stress, burnout, and retirements may result in over 750,000 nurses leaving by 2027. The NCSBN advocates for the adoption of the Nurse Licensure Compact by all states, allowing registered nurses and licensed vocational nurses to practice across state lines, both in person and via telehealth.

In addressing health workforce shortages, policymakers must consider the stress experienced by healthcare workers and the potential strain this places on the healthcare system. These broader considerations, including working conditions and workforce sustainability, are pivotal components of any long-term solution.

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