New Jersey is one of the few states in the US that has achieved and surpassed the goal of a $15 per hour minimum wage for most workers by 2024. The state’s minimum wage increased to $15.13 per hour on January 1, 2024, affecting about 350,000 of the state’s roughly 1.9 million hourly workers. While this policy was intended to improve the living standards and economic security of low-wage workers, it has also had unintended consequences for some sectors, especially health care.
The Impact of Higher Labor Costs on Health Care Providers
The health care industry is one of the largest and fastest-growing employers in New Jersey, providing jobs for more than 600,000 workers. However, it is also one of the most vulnerable to the effects of the minimum wage hike, as it relies heavily on low-wage workers such as home health aides, nursing assistants, and personal care aides. These workers provide essential services to the elderly, disabled, and chronically ill, often in their own homes or in long-term care facilities.
According to the Bureau of Labor Statistics, the median hourly wage for home health aides in New Jersey was $13.55 in 2020, well below the new minimum wage of $15.13. This means that many health care providers had to raise their wages significantly to comply with the law, which increased their labor costs and reduced their profit margins. Some providers also had to pay higher wages to other workers to maintain pay differentials and avoid wage compression.
To cope with the higher labor costs, some health care providers had to resort to layoffs, reduced hours, or service cuts. For example, a home health care agency in Bergen County laid off 50 of its 200 workers and cut the hours of another 50 in January 2024, citing the minimum wage increase as the main reason. Another agency in Monmouth County reduced its staff by 10% and its services by 15%, affecting about 300 clients. A long-term care facility in Camden County closed its doors in December 2023, displacing 120 workers and 60 residents.
The Consequences of Reduced Health Care Services for Workers and Clients
The layoffs and service cuts in the health care industry have negative consequences for both workers and clients. For workers, losing their jobs or hours means losing their income, benefits, and career opportunities. Many of them are women, immigrants, and people of color, who already face barriers and discrimination in the labor market. Some of them may also have to rely on public assistance or take on multiple jobs to make ends meet.
For clients, losing their health care services means losing their access to quality care, comfort, and dignity. Many of them are elderly, disabled, or chronically ill, who depend on the assistance of health care workers to perform daily activities, manage their health conditions, and prevent complications. Some of them may also have to move to institutional settings, such as nursing homes or hospitals, which are more costly and less preferable than home-based care.
The Need for Policy Solutions to Address the Trade-Offs of the Minimum Wage Hike
The minimum wage hike in New Jersey has both benefits and costs for the state’s economy and society. On the one hand, it raises the income and purchasing power of low-wage workers, which can stimulate consumer spending, reduce poverty, and improve well-being. On the other hand, it increases the labor costs and financial pressures of some employers, especially in the health care industry, which can lead to layoffs, reduced hours, and service cuts.
To address the trade-offs of the minimum wage hike, policymakers need to consider policy solutions that can mitigate the negative impacts on the health care sector, while preserving the positive impacts on the low-wage workers. Some possible solutions include:
- Providing subsidies, tax credits, or reimbursements to health care providers who employ low-wage workers, to help them cover the increased labor costs and maintain their services.
- Increasing the funding and eligibility for Medicaid, Medicare, and other public health insurance programs, to expand the coverage and affordability of home-based and long-term care services for low-income clients.
- Creating training and education programs for health care workers, to help them upgrade their skills, obtain certifications, and access higher-paying jobs in the industry.
- Establishing wage boards or councils, to set minimum wages for different sectors or occupations, based on their specific characteristics and needs.
By implementing these or other policy solutions, New Jersey can balance the goals of raising the minimum wage and ensuring the availability and quality of health care services, which are both vital for the state’s economic and social well-being.
New Jersey’s minimum wage hike to $15.13 per hour has had mixed effects on the state’s workers and employers, especially in the health care industry. While the policy has increased the income and living standards of low-wage workers, it has also increased the labor costs and financial challenges of health care providers, leading to massive layoffs and service cuts. These outcomes have negative consequences for both workers and clients, who rely on the health care services for their health, comfort, and dignity. To address the trade-offs of the minimum wage hike, policymakers need to consider policy solutions that can support the health care sector, while maintaining the benefits of the minimum wage increase. By doing so, New Jersey can achieve a more equitable and sustainable economy and society.