California Wage Law Puts ‘Band-Aids’ on Health Worker Shortages

A new California law raising minimum wages for health-care workers is likely to trigger similar pushes for higher pay in other states, a move workforce researchers and attorneys who counsel health systems say must be accompanied by additional policies to address persistent health worker shortages across the country.

California Gov. Gavin Newsom (D) on Oct. 13 signed into law a measure (S.B. 525) setting the minimum wage at $23 an hour starting next year at large health systems and dialysis clinics. That rate will increase to $25 an hour by 2026, but will increase more slowly at some hospitals and rural health-care facilities. The law comes as the US Bureau of Labor Statistics has projected an average of 194,500 annual job openings for registered nurses until 2030, with about 8,000 projected each year for community health workers.

Leaders of the California division of the Service Employees International Union, which led the push for the law, have argued it will help address staffing shortage issues that affect patient access to quality care.

But community health center groups have warned requirements for higher wages could strain facilities serving rural areas and traditionally marginalized communities. Due to this, as well as additional issues of stress and burnout exacerbated by the Covid-19 pandemic, state programs aimed at improving workforce mobility, training, and labor conditions can work in tandem with higher wages to combat nationwide staffing issues, professors and attorneys say.

“These are just Band-Aids. They’re not looking at the core thing,” Patricia Pittman, a health policy professor and director of the George Washington University’s Fitzhugh Mullan Institute for Health Workforce Equity, said of laws raising minimum wages.

State leaders “have to look at the issue of retention in the workforce, and in order to do that they have to be able to look not only at wages and benefits, but also working conditions and the levers to make working in health care more sustainable,” Pittman said.

Union Push

The first-of-its-kind California law could inspire other states to pursue higher, health-care-specific minimum wages, said Renée Saldaña, spokeswoman for the SEIU’s United Healthcare Workers West affiliate.

“This is going to make a dent in fixing what we have been talking about for years: the patient care crisis which is caused by short staffing,” Saldaña said, citing estimates that more than 400,000 health-care workers will get a pay raise once the phased-in wage increases are fully implemented.

“The short-staffing crisis isn’t something that’s unique to California,” she said.

Similar bills pending in the Massachusetts House (H.1877) and Senate (S.1203) would set a higher minimum wage for hospital and health clinic workers at 150% of the regular statewide minimum—which works out to $22.50 per hour for health-care workers at the state’s current wage floor of $15.

Before getting the statewide measure passed, SEIU pushed for local ordinances in about a half-dozen California cities setting higher minimum wages for health-care workers.

Voters in Inglewood, Calif., approved in November 2022 a ballot question setting a $25 minimum wage for certain kinds of workers at private-sector hospitals and clinics. City councils, including in Los Angeles, had passed similar ordinances in 2022, but the hospital industry delayed them by petitioning for a ballot referendum instead.

The California law is “a signal to the industry that these workers are valued. It’s a signal to the workers that they’re valued and that they’re going to make competitive wages and not have to leave these jobs for another industry,” said Susan Chapman, a professor at the University of California, San Francisco, whose research focuses on the health workforce.

Funding Pressure

The push for increased wages also comes at a time when community health centers and other smaller health facilities are experiencing high labor costs and funding strains that haven’t returned to pre-pandemic levels, attorneys who counsel health facilities say.

“It’s worth considering the fact that placing this burden on health-care facilities may have other impacts as well, for example, facility closures or reduction in beds to the extent that the health-care facility can’t support a substantial increase in labor cost,” said Michelle Strowhiro, a partner at McDermott Will & Emery LLP.

A broad coalition of health-care providers initially opposed the California measure, arguing it could significantly raise costs to the point of forcing cuts. They eventually reached an agreement with SEIU for a phased approach to raise wages, scrapping initial language setting a $25 hourly minimum wage starting next year for health-care workers across the state.

But smaller providers in the state expressed concern leading up to Newsom’s bill signing. Craig S. Castro, president and CEO of California’s Community Health System, wrote in an Oct. 11 op-ed that the minimum wage measure “is another crushing blow for hospitals struggling in the inflation-laden, economic aftermath of COVID-19 without a commensurate increase in Medi-Cal and Medicare reimbursement rates.”

The California law does allow some health-care facilities to request waivers citing concerns on the impact higher minimum wages would have on their financial standing.

Wages are only one of the concerns for the National Association of Community Health Centers, according to Amy Simmons Farber, the group’s associate vice president for communications and public relations. A “bigger concern is long term funding for health centers,” which is poised to expire next month unless Congress is able to pass a government funding package, she said in an email.

“Should that funding expire, it will likely impact all aspects of health center operations, including wages,” Simmons Farber said.

Building a Stable Workforce

Policies from other states and nationwide groups aim to expand the range of solutions to encourage workforce retention in the health industry.

“There’s this kind of idea that you could expand the labor pool by basically lowering barriers to entry rather than increasing the amount of pay,” said Chris Kenny, a partner in the health-care practice at King & Spalding LLP.

In New York, state policymakers have developed a multi-pronged approach aimed at retaining direct care workers, nurses, physicians, and other providers. This includes financial support for health-care professional education, expanding the training capacity of medical institutions, and developing a model for training “universal” long-term care workers who want to move across caregiving roles.

The National Council of State Boards of Nursing is also concerned about developing solutions to staffing shortages. The organization’s 2022 workforce study predicted that stress, burnout, and retirements may cause more than 750,000 nurses to leave the workforce by 2027.

The NCSBN wants to see all states adopt the Nurse Licensure Compact, which allows registered nurses and licensed vocational nurses to have one license that allows them to practice in person or via telehealth in any NLC state. The NLC currently has 41 jurisdictions participating, including Pennsylvania, where state health officials recently framed the compact as a chance to address ongoing shortages at health-care facilities.

In any solution to the health workforce shortages, state policymakers should recognize the stress health workers experience, and the strain this can put on the health system, Pittman said.

“As more people are distressed because they’re not providing high-quality care, and patients are getting harmed, they leave and that leaves those who remain even more overwhelmed and more distressed, and so you have kind of a vicious cycle,” Pittman said.