Minimum Wage Increase May Threaten Financial Stability of LTC Facilities

The federal minimum wage, which Congress set at $6.55 an hour two years ago, jumped to $7.25 an hour on July 24. The 70-cent increase is the third such rise in as many years thanks to the Fair Labor Standards Act (FLSA) amendment of 2007, which brought the minimum wage up to $5.85 that year.

The annual increases have coincided with the continual decline of the economy, sparking debate as to whether or not a higher minimum wage serves to benefit troubled times through rejuvenated consumer spending, or in fact further propels the downward spiral as a result of greater job loss numbers.

The dispute has far from evaded the long-term care industry. With already tight budgets, the latest minimum wage increase may force many nursing homes to make adjustments in order to hire or maintain enough staff.

"Any increase in the minimum wage could impact the financial stability of long-term care facilities that pay workers at or below the amount," says Jeannie Adams, an attorney at Hancock, Daniel, Johnson & Nagle, PC, in Richmond, VA.

Although the national average wage for nursing aides is $11.84 an hour, according to the May 2008 National Occupational Employment and Wage Estimates, approximately 10% of nursing aides earn less than $8.34 and hour, which is only $1.09 higher than the new minimum wage amount.

"Fortunately, most certified nursing assistants [CNA] are already paid higher than minimum wage," says Sue LaBelle, MSN, RN, RAC-CT, a senior healthcare specialist at PointRight in Lexington, MA. "However, if nursing homes are paying entry level CNAs or members of the housekeeping or maintenance staff lower than minimum wage, the new amount could have a ripple effect across the board."