February 21, 2023

California Signals Minimum Wage Hike for Healthcare Workers: Higher Pay Needed for Retention and Recruiting

On February 15, union-aligned lawmakers in California introduced legislation that would mandate a $25 minimum wage for healthcare workers and support staffers, which will likely affect hospitals, nursing homes, and dialysis centers, according to Samantha Young of Kaiser News, who reported on the development in the Los Angeles Times. The demand for fair pay and better working conditions prompted a series of planned strikes throughout 2022. In California, the government is realizing that healthcare workers deserve higher wages, even though healthcare systems have fought against them, proposing temporary incentives instead. Placing and retaining nurses is critical, but simply offering bonuses or vague recognition ceremonies won’t solve the problem. For staffing providers to help, there must be a partnership with clients—and a compromise. Attracting skilled nurses means considering higher pay rates that are commensurate with the difficult work they do each day.

Healthy Compensation for Healthy Workforce Performance

“State Sen. María Elena Durazo’s bill would require health facilities and home health agencies to give raises to many support employees, including nurse technicians, housekeepers, security guards, food workers and laundry providers,” Young wrote. “The Los Angeles Democrat said workers remain underpaid even as they play a crucial role in the COVID-19 pandemic. Many who earn close to the state’s $15.50 minimum wage, she said, struggle with inflation.”

“How do people survive?” Durazo told Kaiser Health News ahead of the bill’s introduction. “They can’t be on the edge of becoming homeless. That’s what we’re facing.”

Service Employees International Union-United Healthcare Workers West, an influential union representing nearly 100,000 workers across California, backs the bill. But despite the sway of powerful representation, similar proposals have faced strong opposition from the health industry.

Meanwhile, nurse staffing shortages are still making headlines. The worst of the pandemic may have faded, but the fatigue and stress weighing on healthcare professionals lingers in the aftermath. The pressure facing nurses has opened the door for a mass exodus from the profession. But lowering the rate increases that occurred during the pandemic culminated in a feud between staffing agencies and healthcare systems this past November. Hospitals began demanding an end to the elevated “crisis pay” when their COVID relief funds ran dry. In response, many staffing providers cut rates. The challenge is that while the COVID crisis may have passed, a staffing crisis persists, with travel nurses stuck in the middle of the dispute. This, according to healthcare experts, is indicative of a bigger problem about paying and managing nurses and allied staff moving forward. And unions stepped in.

During the latter half of 2022, nursing unions called for walkouts and work stoppages at major health systems in California, Michigan, Minnesota, Washington, Oregon, New Jersey, and Michigan. Two of the largest potential strikes, those in Minnesota and California, were averted when negotiations resumed. In January 2023, however, more than 7,000 nurses walked out at Montefiore Medical Center and Mount Sinai Hospital in New York, and they were on strike for three days before reaching an agreement with the health systems, as Ron Southwick explained in his article for Chief Healthcare Executive. 

“Industry analysts and nursing leaders have said the New York strike is foreshadowing other intense labor battles in 2023,” Southwick wrote. He cited Kevin Holloran, senior director and sector leader for the non-for-profit healthcare group at Fitch Ratings, who indicated that more strikes and contentious negotiations would unfold in 2023. 

“Health systems are going to have to plan for higher labor costs, said Ash Shehata, KPMG’s national sector leader in healthcare and life sciences,” added Southwick. 

Across all industries, decades-high inflation has contributed to a drive for wage increases. But it’s a more pronounced issue in healthcare, where nursing supply and demand gaps have widened. 

“Ultimately, a combination of inflation, workforce shortages and the COVID-19 pandemic have made raises inevitable,” Kelly Gooch and Erica Carbajal pointed out in Becker’s Hospital Review. “Local market pressures may also play a role, Therese Fitzpatrick, PhD, RN, senior vice president of Kaufman Hall and a member of the firm’s strategic and financial planning practice who specializes in performance improvement, told Becker’s.”

“I would suggest that all boats have risen, that COVID-19 really took a toll on the healthcare workforce, across all spectrums of the healthcare workforce," she said. "So, I think this is in response to sort of general employee engagement and getting a foot up in a market in terms of recruitment and retention.”

Nurses Want Less Burnout, More Bucks

Even though the volumes of patient admissions and infection rates have dropped in the United States, those figures do little to erase the strain that healthcare professionals have been operating under for the past two years. 

“Only 12% of the nurses surveyed are happy where they are and interestingly, 36% would like to stay in their current positions but changes would need to be made for that to happen,” said Kathleen Gaines of “Nurses report wanting safe staffing, safer patient ratio assignments, and increased pay in order to stay in their current roles.” She presented a host of other distressing results gathered from the survey respondents. 

  • ​​87% feel burned out 
  • 84% are frustrated with administrators 
  • 84% feel they are underpaid 
  • 83% feel their mental health has suffered 
  • 77% feel unsupported at work 
  • 61% feel unappreciated 
  • 60% have felt uncomfortable having to work outside of their comfort zone in the past year 
  • 58% of nurses have felt frustrated with their patients 
  • 58% of nurses have felt unsafe at work in the past year 

Among the chief reasons for nurses leaving the bedside?

  • Inadequate staffing ratios 
  • Not getting equal pay for equal experience 
  • Not receiving hazard pay during a pandemic 
  • Not having adequate back up 
  • An inability to take breaks, sick days, or even turn down extra shifts 

The staffing industry has played an instrumental role in helping healthcare providers find travel nurses, bolster float pools, and otherwise ramp up the numbers in systems where resignations and dwindling applications have severely impacted the remaining staff. But recruiting and keeping nurses has become a difficult task. Retention strategies today must include commensurate increases in wages, hazard pay, and safer nurse-to-patient ratios. 

How Staffing Agencies Can Help Solve the Pay Rate Conundrum

The reality is that without offering higher wages, nurses won’t come running to openings. They’re in demand. They’re in control. It’s their market, and they’re aware of this. States like California may force the issue by passing bills for minimum wage hikes, but even without government enforcement, clients are left with a clear choice: accept a bump in rates or leave vacancies unfilled. That said, businesses must also be protected from opportunists who are legitimately gouging rates, in the form of exorbitant expansions to their profit margins. Transparency is key. Here are some tips to judge the difference and drive informed decision making.

  • Staffing partners should provide clients or MSPs with market rate research that demonstrates the average rate increases to benchmark acceptable thresholds.
  • Staffing firms should embrace transparency and offer a breakdown of the cost elements that go into the bill rate: pay rate + statutory costs (e.g., FICA, FUTA, SUTA) + SG&A costs + benefits + profit percentage.
  • Compare the rates proposed across a broader spectrum of staffing suppliers to determine averages and acceptable margins or identify gouging. This is also a prime opportunity to seek out and introduce new staffing partners into a program.
  • Look into the soft benefits that staffing suppliers offer their talent. Anyone involved in travel nursing will tell you that workers expect support and advocacy for their complex roles, including licensing assistance, logistics help, per diem structures, and more. And understand how these necessary actions can increase overhead costs for firms who are providing exceptional and skilled staff.
  • Work with MSPs and staffing partners who have proven themselves to be trusted advisors for consultative collaboration on rationalization, incentives, other avenues of cost savings, onboarding enhancements, or other innovative ideas. 
  • Look past budgets or heightened executive compensation to gauge where the market is. Nurses and allied staff are primary caregivers for patients, and their level of care reflects the reputation of hospitals. Reputation also determines the relative value of a healthcare facility.
  • Attrition comes with a hefty price tag. The Society for Human Resource Management (SHRM) reported that on average it costs a company 6 to 9 months of an employee’s salary to replace him or her. Higher earnings lead to greater retention, which ultimately reduces the big costs associated with turnover.

Nurses want compensation that is commensurate with the heavy work and responsibilities they bear. To source and recruit nurses, staffing agencies must engage them with meaningful offers, which encompass potential rate hikes in the form of crisis pay. The challenge, however, is pushback from hospitals or the beleaguered clients themselves. They want nurses but on occasion have accused agencies of price gouging when proposing crisis pay. It’s a bit of a Catch-22, and success depends on a healthy partnership between staffing providers and their clients, as well as some healthy compromises. 

Photo by Patty Brito on Unsplash

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