Two Million Home Care Workers Will Get Raises, After Obama Reclassifies Their Jobs


Two-million low-wage workers—those taking care of the elderly, people with disabilities and others living at home—will see an increase in their poverty-level wages, under a new federal regulation requiring that they be paid minimum wage and overtime.

“This decision is like a breath of fresh air,” said Laura Lyn Clark, a Virginia home care worker earning $8.87/hour who has a 56-hour workweek. “Overtime protection is going to make paying for my daughter’s college a little easier… And a vacation, which is like a dream come true.”

“I’m so excited,” said Carolyn Gay, a certified nurse assistant and Florida Professional Association of Care Givers board member. “Most of our clients will meet these conditions.”

On Tuesday, the Department of Labor announced a new rule that closed a decades-old loophole in the Fair Labor Standards Act that put home caregivers in the same category as babysitters and exempted them from minimum wage laws. The rule takes effect on January 1, 2015, but it is nonetheless seen as a major victory for low-wage workers.

“The majority of home care workers are women and the primary breadwinners for their families,” said Delia DeLaVara, vice president of the National Council of La Raza. “Minimum wage and overtime protections mean that home care workers—our sisters, mothers, grandmothers, those who care for seniors and those with disabilities—that they can better care for themselves and their families.”

“There’s still work to do to ensure that these rules are implemented and enforced fairly,” said Ai-Jen Poo, director of the National Domestic Workers Alliance and co-director of Caring Across Generations, a coalition seeking affordable home care. “This change is truly just the beginning of what’s needed.”

Nearly two years ago, President Obama met with home care workers and said he would ask the Labor Department to close the loophole that suppressed industry wages. That proposal had been opposed by employers and was criticized by House Republicans on Tuesday, who said it was unaffordable and would push seniors from theit homes into institutions.

“This regulation could increase the cost of care by $2 billion over the next decade,” House Education and the Workforce Committee Chairman John Kline (R-MN) and Subcommittee on Workforce Protections Chairman Tim Walberg (R-MI) said in a joint statement. “Faced with higher costs, some individuals will have no choice but to leave their homes and enter institutional living. This misguided regulation will make matters worse for countless families struggling in the Obama economy.”

But home care worker advocates, such as Steve Edelstein, National Policy Director for the Paraprofessional Healthcare Institute (PHI), who has been working for years to close the low-wage loophole, rejected those claims. And the U.S. Department of Labor estimated that it would increase state-federal Medicaid costs by less than .03 percent annually, Kaiser Health News reported

“Our analysis, based on industry figures, tells us that this is an $84 billion industry,” he said. “There should be resources within this system to do the little bit that we are asking here, which is pay minimum wages over time and extend overtime protection to the folks who carry the load and are actually providing the critical services that people need.”

America’s Fastest Growing Low-Wage Industry

The direct-care industry employs more than 3.4 million people—one-third are nurses; the rest are home health aides and personal care assistants—and will grow to 5 million jobs by 2020, PHI projects. Of this workforce, 90 percent are women. The average age is mid-40s. Half are non-white. And half have a “high school diploma or less,” PHI said.

The industry is a mix of self-employed caregivers and those working for agencies, which employes three-quarters of the field and often are franchises, according to PHI. The trade publication, Franchise Business Review, surveyed more than 1,300 senior care franchise businesses in 2012 and described how the field was expanding and was among the most profitable franchises, “with gross margins of 30-to-40 percent.”

“In the last two years, the definition of senior care and the core services provided by senior care franchises have broadened,” Franchise Business Review said. “Whereas most of the companies we talked to in 2010 provided primarily non-medical, in-home care (e.g., meal preparation, grooming, bathing, transporation, companionship) for seniors, many of the companies that we talked to this year have added new services (e.g., medical care, staffing solutions, child and pet care). While the sector is still widely called ‘senior care,’ we recognize that it encompasses much more than that.”

Franchise Business Review then said why it was one of the most profitable franchises.

“The median initial investment required to open a single senior care franchise office in 2012 is $66,148, and the potential return on investment is significantly higher than many other franchise businesses,” it said. “It is not uncommon among the top senior care franchises to buid gross [annual] revenues to a million dollars or more, with gross margins of 30 percent to 40 percent.” 

Even though managing these businesses is round-the-clock, seven days a week, and far more emotional than say, fast food or retail, because of clients’ needs, “compare that [return] to many food and retail franchises that require an intital investment that can easily exceed $500,000 and operate with slim margins and you will quickly see what makes senior franchises so attractive,” Franchise Business Review said.

There is another factor why this field can afford to pay more. Approximately 70 percent of its revenues come from the government via anti-poverty and retirement programs, said Cathy Ruckelshaus, legal co-director of the National Employment Law Project.

“The reimbursement rates that Medicaid provides are almost double what the workers are getting [paid] for their direct care hours,” she said, citing PHI’s analyses. “So, if it’s an $18/hour reimbursement rate from Medicare for direct care, the workers are getting $9/hour or a little bit less. So there’s quite a cushion.” 

While getting paid minimum wage and overtime will undoubtedly help many caregivers, the field typically does not offer benefits such as health insurance—or that often costs too much for caregivers to buy through their employers, the advocates said. That’s another reason why the Affordable Care Act, or Obamacare, is needed they said, because it will enable people who take care of others to obtain better healthcare for themselves.

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