The home care industry is quaking over the Service Employees International Union's (SEIU) relentless drive to increase caregiving wages to $15 an hour and the impressive traction they're gaining to improve compensation and benefits for those who provide much needed care, support, and assistance to older Americans and those with health or social challenges.
While increased wages will indeed lead to a major disruption of the elder care industry, it will ultimately raise the quality and availability of caregiving in America and actually reduce the cost for families in need of elder care. As the CEO of one of the fastest-growing home care companies, I applaud SEIU's efforts and wholeheartedly endorse their "Fight for $15" initiative.
Caregivers have long been among the most exploited workers in America, working long hours for little pay. A unique breed of compassionate, patient people performing duties and functions most people wouldn't be comfortable doing, caregivers until recently could effectively be employed for less than minimum wage because the powerful home care industry successfully fought a Labor Department rule requiring that employment agencies pay overtime to domestic workers providing in-home care for the elderly, sick, or disabled. Fortunately, an appeals court recently righted that wrong and upheld the Labor Department rule.
Progress to improve pay and working conditions for caregivers is being made on other fronts. The Labor Department has flexed its muscles in Florida, where it has sued an Orlando home care agency for classifying its workers as "independent contractors" and not paying them federal and state employee benefits. Classifying caregivers as independent contractors is not only wrong from a legal standpoint, but an ethical one as well for it exploits the very people who make doing business possible. Many caregivers don't necessarily understand the nuances of what it means to work as a contractor, that their wages have not yet been taxed and that they will be on the hook for Uncle Sam's cut at the end of the year with a significantly large tax bill.
Given that improving the lot of working class Americans is a major priority of the Obama Administration, it seems safe to assume the Labor Department will be clamping down on other home care companies seeking to circumvent well-established labor laws pertaining to domestic workers. One can hope anyway or, like SEIU and National Domestic Workers Alliance, do something to help bring about change.
It may seem counterintuitive that a CEO of a home care company would support higher wages for its caregivers, but frankly it's a sound business decision. I started CareLinx specifically to solve many of the problems my family encountered when struggling to find care for my sister with multiple sclerosis and uncle who had ALS. Caregivers are significantly underpaid, underappreciated but still dedicate their lives to serve those in need of help with activities of daily living. Caregiving is a job requiring a wide range of physical and psychological skills, and the universe of people who have the temperament and aptitude to work as caregivers is quite limited because it's been virtually impossible to earn a living wage working in the profession. According to the Brookings Institution, professional caregivers earn less than $25,000 a year. Given that quality caregivers assume considerable responsibility and routinely improve and extend the life of those they take care of, the paltry wage borders on the obscene.
The shortage of quality caregivers will become more acute as America's demand for them is poised to dramatically increase. While today there are seven potential caregivers for every senior over the age of 79, that ratio is predicted to drop to 3 or 4 to 1 by 2030, according to AARP. That means more Americans will be compelled to seek help from professional caregivers, either in the home or at a nursing facility.
So the only way to induce more people to the caregiving profession is to pay them a meaningful wage. But that's difficult to do under the current industry model: Today most professional caregivers are hired through local agencies that charge between $25- $30 an hour but pay their caregivers less than $11 an hour. The agencies have fixed costs, such as rent, marketing, and franchise fees, and raising prices isn't an option. The $25 hourly rate already is beyond the means of most American families, even in the affluent San Francisco Bay area. A well-funded Silicon Valley upstart tried charging $30 an hour but had to reduce its fee almost 20 percent within a matter of weeks to $25 an hour.
So new models with considerably smaller profit margins that thrive on scaling efficiencies will need to emerge that are predicated on paying caregivers considerably more than they are earning now. CareLinx, for example, is an online platform that allows caregivers across the country to set their own rates and choose their own assignments. CareLinx caregivers already are charging on average $15 to $17 an hour and the families they work for pay a portion of their social security, unemployment, and other taxes. We charge families a flat 15 percent service fee to assist them in choosing and managing a caregiver as well as helping them pay/file the requisite taxes and providing liability insurance for the caregivers.
Corporate America has created a great social divide between senior management and the workers who perform the critical functions that allow businesses to earn their profits. The home care industry can no longer afford this luxury: the interests of management and its workers are very closely aligned.