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Minimum Wage Hike for California Health Care Workers Could Cost the State Billions

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Two people walk past a sign that says 'UC Davis Health' - with a large hospital in the background.
The UC Davis Health campus in Sacramento on Oct. 13, 2023. (Miguel Gutierrez Jr./CalMatters)

Alvin Mauricio Medina works three jobs, six days a week, to support his family as the sole provider for their Los Angeles household. He’s a certified nursing assistant who dreams of moving up to a higher-paying health care position.

“I’m trying to better myself, I’m trying to move on to being a registered nurse. But here in California, with the low wages that we have, either you work or you’re going to school,” he said.

Medina, 45, has worked in health care for over 20 years and makes less than $22 an hour. While his main job is at a hospital in Hollywood, he picks up shifts as a nurse assistant at other hospitals to provide for his husband, who is unable to work and two kids.

He’s expecting to get a break come January, thanks to a law Gov. Gavin Newsom signed last month that gradually raises the minimum wage for health care industry workers to $25 an hour. The measure, expected to boost pay for roughly 500,000 Californians, had support from both unions and the lobbying group representing California hospitals. But lawmakers passed the bill — and Newsom signed it — without providing a cost estimate.

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Now, the Newsom administration is projecting the wage hike will add at least $4 billion in costs to the government agencies that provide health care to Californians. About half of that will come from the state’s general fund and the other half from the federal government.

The unions and lawmakers who advocated for the wage increase say it is necessary to improve the lives of overworked and underpaid health care workers, many of whom have quit their jobs in recent years, leaving health care systems severely understaffed.

“These are everyday people doing their jobs, struggling to make ends meet, struggling to pay rent,” said Todd Stenhouse, a spokesperson for AFSCME 3299, the union representing blue-collar workers in the University of California health system. “They deserve stability, security. Their work deserves value.”

The new cost estimates are unsurprising to Republican lawmakers who opposed the wage increase. Democratic lawmakers passed the measure despite the state’s projected $31 billion budget deficit.

“This bill places astronomical labor costs on health care providers when hospitals across the state deal with financial losses,” said Republican Assemblymember Vince Fong of Bakersfield. “We were concerned that this bill will lead to reduced services, increased premiums, more hospital closures, reduced job opportunities.”

What wage hike means for payroll

Lawmakers did not have cost estimates when they voted on the wage increase in part because the final bill reflected a last-minute deal between major health care employers represented by the California Hospital Association and the Service Employees International Union. Their agreement replaced an earlier version that would have raised pay faster for workers.

While the original bill would have immediately raised wages to $25, the signed version will gradually increase wages. Most workers are expected to reach $25 an hour by 2027 or 2028, although it will come sooner to workers in certain facilities, like dialysis clinics and large health systems with more than 10,000 employees.

Some of the workers are employed by the state, either at the UC health system or in agencies such as the Department of State Hospitals.

In the private sector, a consultant working for a coalition of health care providers estimated the original bill with the immediate wage increase to $25 an hour would have cost the industry $8 billion. The California Hospital Association did not have a new estimate of projected costs when CalMatters requested one.

SEIU California Executive Director Tia Orr, in a written statement, said that most health care employers supported the wage increase. She said the union “has committed to working with the administration and the Legislature to ensure safeguards are in place to guarantee that this critical measure is taken to preserve California’s fiscal health, just as we did when negotiating the last statewide minimum wage increase. This is how you make progress — through flexibility and compromise in achieving shared goals.”

Health care workers on public assistance

Newsom did not comment on the law when he signed it. In contrast, he attended an event hosted by SEIU when he signed a similar law that creates a $20 minimum wage in the fast-food industry.

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Sen. María Elena Durazo, the Los Angeles Democrat who wrote the original health care wage increase, pointed to a different cost estimate for the law provided by the UC Berkeley Labor Center. It projected the new law could save the state money by ensuring workers earn enough to avoid using public assistance.

Hundreds of thousands of Californians will see their wages increase, which means money in the pockets of healthcare workers to help support their families,” she said in a statement, calling it a “historic investment.”

Gabriela Guevara, a medical receptionist at Clinica Sierra Vista in Fresno, believes the law will ease staffing challenges in her industry.

“It is going to better serve all the patients. The more staff we have, we are going to be able to give that quality of care for all the patients that are coming in,” she said.

Medina, the certified nursing assistant in Los Angeles, hopes the new law will allow him to quit one of his jobs when it takes effect.

“It is definitely going to let me spend more time with my kids,” Medina said. “It will let me go to school. And I don’t have to worry about being late to my third job or my second job. I can just focus on one.”

Supported by the California Health Care Foundation (CHCF), which works to ensure that people have access to the care they need, when they need it, at a price they can afford. Visit www.chcf.org to learn more.

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