{"id":2649,"date":"2024-04-16T09:36:59","date_gmt":"2024-04-16T09:36:59","guid":{"rendered":"https:\/\/healthynewsusa.com\/?p=2649"},"modified":"2024-04-16T09:37:03","modified_gmt":"2024-04-16T09:37:03","slug":"california-health-workers-may-face-rude-awakening-with-25-minimum-wage-law","status":"publish","type":"post","link":"https:\/\/healthynewsusa.com\/?p=2649","title":{"rendered":"California Health Workers May Face Rude Awakening With $25 Minimum Wage Law"},"content":{"rendered":"
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SACRAMENTO, Calif. \u2014 Nearly a half-million health workers who stand to benefit from California\u2019s nation-leading $25 minimum wage law<\/a> could be in for a rude awakening if hospitals and other health care providers follow through on potential cuts to hours and benefits.<\/p>\n

A medical industry challenge to a new minimum wage ordinance in one Southern California city suggests layoffs and reductions in hours and benefits, including cuts to premium pay and vacation time, could be one result of a state law set to begin phasing in in June. However, some experts are skeptical of that possibility.<\/p>\n

The California Hospital Association brought a partly successful legal challenge to Inglewood\u2019s $25 minimum wage ordinance<\/a>, which barred employers from taking those sorts of steps to offset their higher costs.<\/p>\n

\u201cLayoffs, reductions in premium pay rates, reductions in non-wage benefits, reductions in hours, and increased charges are consequences of an employer having less money to spend\u2014which will necessarily be the case given the significant increase in spending on wages due to the minimum wage,\u201d the association said in its lawsuit<\/a>. Additional examples include reducing health coverage and charging for parking or work-related equipment.<\/p>\n

Inglewood voters approved the ordinance<\/a> in November 2022, nearly a year before California legislators enacted a $25 minimum wage for health workers. Those statewide higher wages are to be phased in starting in June under California\u2019s first-in-the-nation law, but Gov. Gavin Newsom has since said they are too expensive<\/a> as the state faces a deficit estimated between $38 billion<\/a> and $73 billion<\/a>. It\u2019s unclear if lawmakers will agree to a delay or take other steps to reduce the cost.<\/p>\n

U.S. District Judge Dale S. Fischer agreed with the hospital industry in a March 11 tentative ruling when he shot down the portion of Inglewood\u2019s ordinance banning layoffs and clawbacks by employers, while allowing the rest of the ordinance to remain in effect. He gave the sides time to object to his preliminary decision, though none did.<\/p>\n

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The California Hospital Association represents more than 400 hospitals and was a key backer of the state\u2019s carefully crafted compromise law, which notably contains none of the employee safeguards included in the Inglewood ordinance.<\/p>\n

Spokesperson Jan Emerson-Shea said the association doesn\u2019t know how providers will react once the state law takes effect. \u201cWe don\u2019t have any insights,\u201d she said.<\/p>\n

\u201cThe challenge for any health care organization is figuring out how to pay for the higher wages,\u201d said Joanne Spetz, director of the Philip R. Lee Institute for Health Policy Studies at the University of California-San Francisco. \u201cSince labor costs are the largest part of any health care organization\u2019s costs, it\u2019s hard to figure out how to reduce spending without looking at labor costs.\u201d<\/p>\n

Providers can try to increase revenues by bargaining for higher reimbursements from commercial insurers, she said. Public hospitals, nursing homes, and community clinics get most of their money through Medi-Cal, the state\u2019s Medicaid program.<\/p>\n

Providers could reduce the services they offer, pare back charity care, and cut or delay capital investments, Spetz said. In the long term, she expects some combination of spending cuts and revenue increases.<\/p>\n

Both the state law and local ordinance cover far more than doctors and nurses, with a definition of health worker that includes janitors, housekeepers, groundskeepers, security guards, food service workers, laundry workers, and clerical staff.<\/p>\n

The most recent estimate<\/a> by the Health Care Program at the University of California-Berkeley Labor Center is that as many as 426,000 health workers would make an average of $6,400 extra in the law\u2019s first year, a 19% average pay bump mainly benefiting lower-income workers of color and women<\/a>. State finance officials project that well over 500,000 workers will benefit.<\/p>\n

Researchers didn\u2019t include layoffs and other potential staffing and benefit reductions when they projected the state law\u2019s costs and benefits, said Laurel Lucia, the program\u2019s director. But she pointed to initial projections by hospitals, doctors, and business and taxpayer groups that the wage hike would cost $8 billion annually, thereby imperiling services and resulting in higher premiums and higher costs for state and local governments.<\/p>\n

\u201cIt seems like a contradiction to say this law\u2019s going to cost billions of dollars while at the same time saying it\u2019s going to reduce workers\u2019 total compensation,\u201d said Lucia, who projects a far lower price tag.<\/p>\n

She added that state finance officials had anticipated that Medi-Cal reimbursements would reflect the increased labor costs, while Medicare would eventually at least partially compensate for the higher labor costs.<\/p>\n

Michael Reich, chair of the Center on Wage and Employment Dynamics at UC Berkeley\u2019s Institute for Research on Labor and Employment, and affiliated economist Justin Wiltshire recently argued<\/a> that California\u2019s new $20 minimum wage law for fast-food workers won\u2019t result in mass layoffs and price increases, as some have predicted.<\/p>\n

Health care is much different than fast food, Reich acknowledged, but he argued for much the same positive result.<\/p>\n

\u201cA higher minimum wage will make it easier and cheaper for hospitals to recruit and retain these workers. The cost savings, and the productivity benefits of more experienced workers, could offset much of the labor cost increase,\u201d Reich said.<\/p>\n

The hospital association filed its lawsuit against Inglewood\u2019s ordinance in July, while it was still opposing early versions of the statewide minimum wage legislation. Among many other provisions, the statewide law put on hold an initiative to cap hospital executives\u2019 salaries<\/a> in Los Angeles.<\/p>\n

The hospital association\u2019s legal challenge referenced in part layoffs and reduced working hours imposed by Centinela Hospital Medical Center after Inglewood\u2019s ordinance took effect.<\/p>\n

But Centinela said the reduction was entirely unrelated to the ordinance and that all staff were offered alternate positions, which many accepted.<\/p>\n

\u201cCentinela Hospital also has since added many more jobs in new clinical positions above minimum wage scale,\u201d the hospital said in a statement.<\/p>\n

Service Employees International Union-United Healthcare Workers West, the prime backer of both the local ordinance and the statewide law, sued the hospital in April 2023 alleging that it cut workers\u2019 hours to offset the higher minimum wage. The case is still pending.<\/p>\n

The union did not respond to repeated requests for comment.<\/p>\n

In a court filing, however, the union and city of Inglewood said similar employer restrictions in previous minimum wage laws have survived.<\/p>\n

The ordinance \u201cmerely sets the backdrop for collective bargaining negotiations,\u201d and does not bar employers from locking out employees or hiring replacement workers during a strike. Employers can still lay off workers or reduce their hours, they said, so long as they don\u2019t do so to fund the higher minimum wage.<\/p>\n

But Fischer agreed with the hospital association that layoffs and reductions in employees\u2019 total compensation packages are \u201cobvious responses by an employer to rising compensation costs.\u201d<\/p>\n

Restricting employers\u2019 options would violate federal labor relations rules, he said.<\/p>\n

\u201cThe minimum wage an employer has to pay its employees will invariably affect the total amount of compensation it is able or willing to pay,\u201d he wrote \u201cThis will then invariably affect the number of employees it can retain and the number of hours those employees will be scheduled to work.\u201d<\/p>\n

This article was produced by <\/em>KFF Health News<\/em><\/a>, which publishes <\/em>California Healthline<\/em><\/a>, an editorially independent service of the <\/em>California Health Care Foundation<\/em><\/a>.<\/em>\u00a0<\/p>\n