One of the few states that still pays the federal minimum wage of $7.25 an hour—which has remained constant since 2009—is Pennsylvania. The Pennsylvania House of Representatives did, however, adopt a law in June 2023 that increased the minimum wage to $11 by January 1, 2024, and then to $15 by 2026.
Governor Tom Wolf backed the bill, claiming that an increase in the minimum wage would benefit millions of people and strengthen the economy. The Republican-controlled Senate, however, fiercely opposed the plan, claiming that raising the minimum wage would harm small businesses and result in job losses. The Senate never got to vote on the bill, and the minimum wage issue was left unresolved at the end of the legislative session.
Following the lead of other states like New Jersey and Maryland, which have already passed legislation to raise the minimum wage to $15 per hour in the coming years, several Pennsylvanian firms choose to voluntarily raise their minimum salaries in 2024 despite the lack of legislative action. The healthcare industry, where many employees, particularly home health aides and personal care assistants, receive low salaries and experience high turnover rates, was one of the industries that witnessed the largest salary gains.
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The healthcare sector, which was already dealing with the COVID-19 pandemic and the aging population, was unintentionally affected by the pay increase. The Pennsylvania Health Care Association, a trade association that advocates for long-term care providers, reported that the hike in the minimum wage led to widespread layoffs, a reduction in the number of hours worked by healthcare professionals, increased expenditures, and a decline in the standard of patient care.
The Effect of the Increase in the Minimum Wage on Healthcare Personnel
According to an analysis by the Pennsylvania Health Care Association, raising the minimum wage would result in extra costs for the long-term care industry of $1.6 billion in 2024 and $4.5 billion by 2026 if there was no commensurate rise in state or federal reimbursement rates. According to the analysis, thousands of elderly and disabled individuals would be left without access to proper care if several providers were forced to close their locations or scale back their services as a result of the pay increase.
The study gave numerous instances of providers that were forced to reduce hours or lay off employees as a result of the pay increase, including:
- A Philadelphia nursing home lowered the hours of another 10% of its employees and laid off 15% of them; as a result, the facility was using more agency staff and providing less care for its residents.
- A Pittsburgh-based home health firm decreased the hours of thirty of its assistants and fired twenty of them, driving many of its customers into nursing homes and depriving them of consistent care.
- A Harrisburg personal care home had a 15% reduction in staff hours and 10% staff layoffs, which resulted in a decline in care quality and an increase in resident and family complaints.
The report also issued a warning, stating that raising the minimum wage would exacerbate the labor crisis already present in the healthcare industry, which was beset by issues like high turnover, low retention rates, and difficulties in hiring and onboarding new employees. According to the analysis, since workers would not see a large rise in compensation compared to entry-level occupations, the wage hike would deter them from pursuing higher education or certification. Additionally, the research made the argument that other businesses would be able to provide comparable or greater compensation together with less demanding work environments, making the healthcare sector less competitive in attracting and keeping talent.
Government and the Health Care Industry’s Reaction
The state and federal governments have been lobbied by the healthcare sector to increase funding and offer more assistance to mitigate the effects of the minimum wage increase. Medicaid payment rates for long-term care providers need to be increased, according to the Pennsylvania Health Care Association. The rates haven’t been changed since 2014. Additionally, the group has requested that the state establish a wage pass-through scheme that would enable providers to spend a portion of the higher reimbursement rates to raise their employees’ pay directly. Additionally, the group has asked the state to give tax credits or grants to providers that choose to pay more than the federal minimum wage.
Additionally, there has been pressure on the federal government to address the minimum wage issue and how it affects the healthcare industry. An executive order signed by President Joe Biden in February 2024 increased the minimum wage for federal contractors to $15 per hour by the year 2025. Approximately 2 million people will be impacted by the directive, and many of them are employed in healthcare facilities like nursing homes and hospitals for veterans. Labor unions and supporters applauded the ruling, claiming that it would boost low-wage workers’ living standards and working conditions. Some lawmakers and business associations, however, opposed the decree, claiming that it would raise expenses and lower the standard of public services.
The Raise the Wage Act, a plan that would raise the federal minimum wage to $15 per hour by 2025 and link it to inflation after that, was also brought back to life by the executive order. The plan was approved by the House of Representatives in 2021, but it was met with resistance from Republicans and a few centrist Democrats in the Senate, where it stopped. In 2023, the bill was resurrected, but it was unable to break a filibuster with enough votes. Raising the federal minimum wage, according to the bill’s proponents, would help millions of workers escape poverty, lessen income inequality, and boost the economy. Opponents of the bill claim that a raise in the federal minimum wage will damage small businesses, result in the loss of millions of jobs, and drive up living expenses.
In Summary
There are no simple or unambiguous answers to the complicated and contentious problem of the minimum wage and how it affects the healthcare industry. The Pennsylvania minimum wage increase has demonstrated the advantages and disadvantages of raising low-wage workers’ compensation, particularly in the healthcare sector, which is undergoing several changes and problems. While raising the minimum wage has helped some healthcare professionals financially and morally, it has also led to significant layoffs and reduced hours for others, greater prices, and worse patient care. Together with addressing the sector’s fundamental problems—such as a shortage of workers, inadequate reimbursement rates, and high service demand—the government and the healthcare industry have been attempting to discover measures to lessen the negative consequences of the pay increase. The discussion surrounding the minimum wage and its impact on the economy and society is likely to never end since many parties involved have varying interests and points of view.