New Jersey is one of the few states in the United States that has met and exceeded the objective of a $15 per hour minimum wage for most workers by 2024. The state’s minimum wage was raised to $15.13 per hour on January 1, 2024, affecting around 350,000 of the state’s 1.9 million hourly workers.
While this policy was meant to increase low-wage workers’ living conditions and economic stability, it has had unforeseen implications in several industries, particularly health care.
Read more: Minimum Wage in Washington Will Increase in 2024, and for Some Employees, It Will Rise Even Further
The Effect of Rising Labor Costs on Healthcare Providers
The healthcare business is one of the largest and fastest-growing industries in New Jersey, employing over 600,000 people. However, it is also one of the most sensitive to the consequences of the minimum wage increase since it relies significantly on low-paid workers such as home health aides, nursing assistants, and personal care aides. These professionals offer critical services to the aged, handicapped, and chronically sick, usually in their own homes or long-term care institutions.
According to the Bureau of Labor Statistics, the median hourly income for home health aides in New Jersey was $13.55 in 2020, far lower than the new minimum wage of $15.13. This implies that many healthcare providers have to considerably boost their pay to comply with the regulation, increasing labor expenses and decreasing profit margins. Some suppliers have to pay greater rates to other workers to preserve pay differentials and avoid wage compression.
To deal with rising labor expenses, several healthcare providers have to resort to layoffs, decreased hours, or service reductions. For example, a home healthcare service in Bergen County let off 50 of its 200 employees and reduced the hours of another 50 in January 2024, citing the minimum wage hike as the primary cause.
Another organization in Monmouth County cut its personnel by 10% and services by 15%, affecting around 300 customers. A long-term care facility in Camden County closed in December 2023, displacing 120 employees and 60 residents.
The Impact of Reduced Health Care Services on Employees and Clients
Layoffs and service cuts in the healthcare business are bad for both employees and patients. For employees, losing their employment or hours means losing their money, benefits, and career prospects. Many of them are women, immigrants, and people of color, who already confront challenges and prejudice in the workplace. Some of them may need to rely on public assistance or work numerous jobs to make ends meet.
Clients who lose their healthcare services will lose access to quality treatment, comfort, and dignity. Many of them are old, handicapped, or chronically sick, and they rely on healthcare staff to help them with everyday tasks, manage their health problems, and avoid complications. Some of them may have to relocate to institutional settings, such as nursing homes or hospitals, which are more expensive and less desirable than home-based care.
The Need for Policy Solutions to Address the Trade-offs of the Minimum Wage Increase
The increase in New Jersey’s minimum wage has both positive and negative consequences for the economy and society. On the one hand, it increases the income and purchasing power of low-wage workers, potentially stimulating consumer expenditure, reducing poverty, and improving well-being. On the other side, it raises labor expenses and financial constraints for some firms, particularly those in the healthcare industry, potentially leading to layoffs, decreased hours, and service reduction.
Also read: Ohio’s Minimum Wage Increase Causes Massive Health Care Layoffs
To address the trade-offs of the minimum wage increase, policymakers must seek policy options that can reduce the negative effects on the healthcare sector while keeping the favorable effects on low-paid workers. Some such solutions are:
- Subsidies, tax credits, or reimbursements are provided to healthcare providers who employ low-wage workers to assist them in paying increasing labor expenses while maintaining their services.
- Increasing financing and eligibility for Medicaid, Medicare, and other public health insurance programs to increase coverage and affordability of home-based and long-term care services for low-income individuals.
- Developing training and education programs for healthcare professionals to help them improve their abilities, receive certifications, and gain access to higher-paying employment in the field.
- Establishing pay boards or councils to determine minimum rates for various industries or vocations based on their unique qualities and demands.
Implementing these or other policy measures will allow New Jersey to strike a balance between raising the minimum wage and guaranteeing the availability and quality of healthcare services, both of which are critical to the state’s economic and social well-being.
Conclusion
New Jersey’s successful accomplishment of a $15 per hour minimum wage by 2024 has unforeseen effects on the healthcare industry. The pay increase benefits low-paid workers but hurts healthcare professionals, resulting in layoffs and service reduction.
This trade-off emphasizes the need for complex policy measures, such as healthcare provider subsidies and increased public health insurance, to mitigate negative impacts on the healthcare business while preserving advantages for low-income workers.