Massachusetts was one of the first states to establish a $15 per hour minimum wage beginning January 1, 2023. The strategy was meant to enhance the living conditions and economic security of low-wage workers, particularly in light of the COVID-19 epidemic and growing living costs.
However, the wage rise has had a severe impact on several areas of the economy, especially health care, where many workers have suffered layoffs, fewer hours, and higher responsibilities.
The Effect of the Minimum Wage on Healthcare
Health care is a labor-intensive business that relies largely on direct patient care providers such as nurses, aides, therapists, and technicians. These workers are frequently paid around the minimum wage, and their companies must deal with restricted budgets, regulatory challenges, and increased demand for services.
According to a Massachusetts Health Policy Commission study, the state’s healthcare spending increased by 4.3% in 2023, above the state’s baseline of 3.1%. The study attributed the surge in part to the minimum wage increase, which increased healthcare payroll expenditures by $1.2 billion.
The minimum wage increase has pushed many healthcare firms to minimize expenses by laying off employees, cutting their hours, or outsourcing their operations. For example, Partners HealthCare, the state’s largest healthcare organization, stated in February 2024 that it would cut 1,000 positions, largely in administrative and support functions, to save $100 million.
Read more: Arizona’s Minimum Wage Increase Causes Massive Layoffs for Health Care Workers
Other healthcare providers, such as nursing homes, home health agencies, and hospices, have cut their workforce or closed their doors, citing the minimum wage as a primary reason. According to the Massachusetts Senior Care Association, more than 20 nursing facilities have closed or announced intentions to close since 2020, affecting more than 2,000 residents and 3,000 employees.
Layoffs and closures have hurt not just the employees who have lost their employment, but also the patients who rely on them for treatment. Many patients have reported lengthier wait times, worse quality treatment, and limited access to services, particularly in rural and underdeveloped areas.
Some customers have also had to pay extra out of pocket for their care, as some providers have raised their rates or copayments to compensate for rising labor expenses. The minimum wage increase has also resulted in a lack of skilled healthcare professionals since many have left the business or relocated to places with lower salaries.
Need for a Balanced and Sustainable Approach
While the minimum wage increase has benefitted some individuals by raising their earnings and purchasing power, it has also harmed others by restricting job possibilities and risking their health care.
The strategy has also placed a substantial strain on the healthcare sector, which is critical to the well-being and economic productivity of the state’s people. As a result, a balanced and long-term strategy is required, taking into account the trade-offs and effects of the minimum wage on various stakeholders and sectors of the economy.
One possible answer is to use a regional or industry-specific approach to the minimum wage rather than a statewide one. This would allow for more adaptability and response to local economic conditions and labor market dynamics.
Also read: Virginia’s Minimum Wage Increase Causes Massive Health Care Layoffs
Some states, such as New York and Oregon, set various minimum wage rates for different areas or counties depending on characteristics such as population density, cost of living, and median income. Similarly, other jurisdictions, such as Nevada and Hawaii, have multiple minimum wage rates for different sectors or vocations, depending on things like tips, perks, and skill level.
Another option is to give more support and assistance to the healthcare industry and workers affected by the minimum wage increase. This might include raising the state’s financing and reimbursement rates for healthcare services, particularly those provided to low-income and vulnerable populations.
It might also entail giving tax breaks, subsidies, or grants to healthcare firms that keep or hire workers at the minimum wage or above. It might also entail providing training, education, or career development options for healthcare personnel who desire to improve their abilities or transfer to other industries.
Conclusion
The $15 per hour minimum wage, introduced in Massachusetts to improve living circumstances, has had a negative impact on the healthcare industry. Layoffs, decreased hours, and closures by healthcare providers have jeopardized patient service, and accessibility, and raised out-of-pocket expenses. A balanced and long-term solution, such as region-specific minimum wages or targeted support for impacted industries, is proposed to limit the detrimental impact on employment and healthcare services while still meeting the requirements of low-wage workers.