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$25 Minimum Wage for All “Healthcare Workers” Would Increase Hospital Closures – Pacific Research Institute

$25 Minimum Wage for All “Healthcare Workers” Would Increase Hospital Closures

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In February, union-backed California state Democratic Senators introduced SB-525, a bill that would give all “healthcare workers” a minimum wage of $25 an hour. Hardly a veiled distortion, the bill applies not to nurses or doctors (i.e. individuals colloquially recognized as healthcare workers) but supply stockers, janitors, security guards, or anyone skilled or unskilled that happens to work at hospitals or healthcare facilities.

While those who do these jobs are hardworking and deserve to be paid well for doing such tough work, forcibly increasing the minimum wage to an unaffordable $25 per hour will cause increased financial strain on hospitals and healthcare facilities already struggling to keep doors open.

In the current economic crisis, many hospitals simply cannot afford to serve the public and patients, while significantly increase their labor costs. For example, the average pay of an unarmed security guard in California in the private sector is just below $18 an hour; receptionists also make about $18 an hour; janitors make $17 an hour. Increasing wages by $7 per hour or more for such employees would result in a significant financial burden for hospitals. As SB-525 makes its way through its committee, a more comprehensive analysis of the bill’s potential fiscal impact will be provided.

In early February, the President and CEO of the California Hospital Association, Carmela Coyle, released a statement emphasizing the current financial hardship facing California hospitals. One California hospital sadly closed its doors early this year, with more closures predicted to follow soon. Other healthcare facilities cut services or entire departments. She wrote, “it’s the most vulnerable patients who are suffering most.”

The closed hospital referenced in Coyle’s statement was the Madera Community Hospital which was located in a rural, low-income, and largely Latino community in the center of the state. Local residents depended on the hospital for care, but now must drive further for care or go without.

Requiring already strained hospitals to significantly increase their labor costs will only result in larger unintentional health consequences for vulnerable individuals as healthcare services diminish.

Proponents of the bill claim that increased pay would incentivize healthcare workers to continue working in hospitals. As frequently reported throughout the pandemic, nurses and doctors are overworked. Hospitals cannot find enough healthcare workers to sufficiently care for patients.

Nurses and doctors already make more than $25 an hour, which makes the bill inapplicable to them. The bill would only apply to lower-wage, unskilled positions. Unions leveraging nursing and doctor shortages to increase pay for non-healthcare positions distract lawmakers from focusing on effective solutions.

It is true, inflation and the pandemic hit low-income workers especially hard. As the cost of housing and food increases many struggle to afford to live on the state’s current minimum wage.

In a protest organized by SEIU-UHW, a hospital cook spoke about how after his 8-hour workday, he drives an additional 6 hours for Lyft. His story demonstrates the current economic crisis in California, which is the fault of bad public policy enacted by Democratic state lawmakers- not hospitals  paying too little to their workers. Rather than risk increased hospital closures, lawmakers should focus on making California a more affordable place to live through reduced taxes, regulations, and mandates.

A study by Pacific Research Institute’s Wayne Winegarden, Harmful Policy Choices Driving Employers, Every Age Group and Income Level Away from California, found that the cost of living in California is a direct result of onerous taxation and legislative restrictions. To make California more affordable for workers in every field, not just those who work at hospitals and in healthcare facilities, lawmakers should look to repeal taxes such as the gas tax to address our unaffordable energy burdens, approve more housing development by getting rid of CEQA and other restrictive regulations to lower housing costs -and remove other needless legislation that make it very expensive to live here.

To solve the nursing and doctor shortage, California could lower the cost of education so that more individuals from all backgrounds can pursue an education in the healthcare field. Additionally, removing California-specific restrictive licensure and scope of practice laws would allow more qualified nurses to practice in California.

Additionally, by investing in more hospital residency positions, California could educate more aspiring specialist doctors. Earlier this year, the Governor’s office pledged almost $50 million in grants to fund healthcare programs and residency positions.

Finally, eliminating Medi-Cal fraud by removing individuals from Medi-Cal who no longer qualify for taxpayer-funded healthcare would allow the government to pay more to hospitals for services without increasing taxes. By increasing reimbursement rates for actual services rendered through the jointly funded state and federal government Medi-Cal program, hospitals could then hire more nurses and doctors.

SB-525 fails to adequately solve current issues facing California’s healthcare system and will even exacerbate future hospital and medical center closures.

McKenzie Richards is a policy associate at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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