Employment Subsidies, Wages, and Retention

• In Event: The Direct Care Workforce: Recruitment, Retention, and Labor Market Dynamics

Abstract

Direct care healthcare employees working in long-term care settings, such as nursing homes, typically receive low wages, averaging $17.27 in 2019. In addition, turnover is high and most nursing homes do not meet clinical standards for staffing most days (Geng et al. 2019). These staffing patterns in turn have implications for the quality of care provided since low staffing levels and high worker turnover have been linked to myriad adverse health and safety outcomes for residents (Centers for Medicare and Medicaid Services 2019). Yet little is known about whether wage pass-through policies or state-led financial incentives can affect staffing and turnover. Moreover, it is unclear how much of so-called wage pass-through programs are captured by employers. We shed light on these questions by examining a reform in the state of Illinois that aimed to increase staffing and reduce turnover in nursing homes through large “experience payments.” These payments subsidized wage increases of $1 per year of industry experience, up to $6.50 an hour for direct care staff (CNAs) in some facilities, while other facilities did not receive such wage incentives. Our analyses combine administrative earnings records from the state of Illinois with data on shift-level hours worked from timesheet data. These data allow us to construct an “effective hourly wage” for individual workers and examine how scheduling patterns change after the pass-through program was adopted. We compare staffing patterns in adopting- and non-adopting facilities before and after the reform and a “notched” analysis comparing workers who were eligible for higher subsidies compared to their co-workers who were eligible for lower subsidies. Our preliminary findings suggest that payments increased staffing in the medium-term, driven by increased hiring of CNAs. Increased staffing was concentrated in facilities that served a large share of Medicaid residents. We also document substantial heterogeneity in effective hourly wages within a facility and across facilities over time. In ongoing analyses, we are examining the distributional effects of wage policies in terms of earnings and hours worked. These results will help inform how financial incentives can shape retention and staffing.

Author

• Krista Ruffini, Georgetown University
  Presenting Author