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California’s $25 minimum wage for healthcare workers: Unions make history, hospitals get certainty | Analysis

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Labor groups rejoiced when Gov. Gavin Newsom signed the measure into law. For hospitals, they avoid the prospect of cities moving to raise wages more quickly.

When California Gov. Gavin Newsom signed legislation to raise the minimum wage for the state’s healthcare workers to $25 per hour, unions and hospitals both touted victories, for different reasons.

California Gov. Gavin Newsom signed a law raising the minimum wage for healthcare workers to $25 per hour. Labor leaders and hospital groups pushed lawmakers in the state capitol building in Sacramento to sign the measure. (Image credit: ©Leonid Andronov - stock.adobe.com)

California Gov. Gavin Newsom signed a law raising the minimum wage for healthcare workers to $25 per hour. Labor leaders and hospital groups pushed lawmakers in the state capitol building in Sacramento to sign the measure. (Image credit: ©Leonid Andronov - stock.adobe.com)

Labor unions touted the new law as a historic victory that will make a real difference in the lives of healthcare workers. Newsom signed the measure Oct. 12.

“California is putting a stop to the hemorrhaging of our care workforce by ensuring healthcare workers can do the work they love and pay their bills – a huge win for workers and patients seeking care,” Tia Orr, executive director of SEIU California, said in a statement. “Californians saw the courage and commitment of healthcare workers during the pandemic, and now that same fearlessness and commitment to patients is responsible for a historic investment in the workers who make our healthcare system strong and accessible to all.”

While unions can say they made history, hospitals at least secured some predictability, leading them to support the legislation known as SB 525.

First, hospitals gained provisions in the legislation that will phase the increases over time. In fact, hospitals with a high percentage of Medicare and Medicaid patients and small rural hospitals will see the minimum wage for their workers rise over the next 10 years. Larger hospitals will see raises take effect more quickly, but still over a period of a few years.

The California Hospital Association noted that the legislation also gives hospitals some important assurance and avoids the prospect of cities moving ahead with their own legislation to raise pay, and on a faster timetable. The new law prohibits local ordinances from setting higher minimum wages.

When California lawmakers overwhelmingly approved the legislation in September, the hospital association said it pressed Newsom and key members in the governor’s “office to express just how important this bill is for hospitals.”

“Our message: SB 525 preserves access to care while a veto reduces access to care and would immediately put many more hospitals at risk of closure,” the hospital association said.

Hospitals pointed out the likelihood that if some cities ended up passing local measures to raise wages, they could spread like “wildfire,” causing some hospitals to shut their doors, cut services or lay off staff.

Carmela Coyle, president & CEO of the California Hospital Association, expressed relief when the governor signed the bill.

“Gov. Newsom’s signature on landmark legislation to improve wages for California’s healthcare workers will create meaningful change for families struggling to keep pace while at the same time protecting access to care in vulnerable communities,” Coyle said in a statement. “This bill strikes the right balance between significantly improving wages while protecting jobs and safeguarding care at community hospitals throughout the state.”

Newsom signed the bill as Kaiser Permanente and its unions reached a tentative deal on a strike. The agreement called for minimum wages across Kaiser Permanente, rising to $25 in California and $23 in the health system’s other markets. The agreement also calls for 21% raises over the terms of the four-year pact, and union workers are slated to begin voting to ratify the deal on Wednesday.

Who would be helped

An analysis by UC Berkeley Labor Center estimates that the $25 minimum wage for healthcare workers would help 455,000 people, or about 40% of California’s healthcare workforce.

The analysis notes that many of the state’s healthcare workers rely on Medi-Cal, California’s Medicaid program, and other social service programs.

SEIU California estimates that more than three-quarters (75.4%) of the workers who would see higher wages are women, and 76% are people of color. Nearly half of all healthcare workers affected are Latino.

When wages will rise

Bigger hospitals will have to raise wages more quickly, while smaller facilities will move more gradually over the next decade.

Here’s the breakdown of when hospitals will move to the $25-per-hour minimum wage.

Larger health systems, hospitals and all dialysis clinics: The minimum wage will rise from $23 per hour on June 1, 2024 to $25 in 2026.

Community clinics: The minimum wage will rise from $21 in 2024 to $25 in 2027.

Smaller hospitals and home health agencies: The minimum wage increases from $21 in 2024 to $25 in 2028.

Hospitals with large percentages of Medicare and Medicaid patients and small, rural hospitals: This group would have the most gradual increase. The minimum wage for these facilities would be $18 in 2024, and rise 3.5% annually in subsequent years. In 2033, the minimum wage would rise to $25 per hour.

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