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Analysis

Why UPMC is Raising Its Minimum Wage to $15 Per Hour

By Lena J. Weiner  
   April 18, 2016

UPMC recently joined a small number of hospitals and health systems committed to offering a minimum starting wage of $15.00 per hour. UPMC's chief human resources officer explains why and how the decision was made.

Raising the minimum wage has become a hot topic this election cycle. Democratic party presidential hopefuls, the U.S. Secretary of Labor, the Governor of New York, municipal leaders, labor unions and advocates, and voters are weighing in with their opinions.

But even among proponents, the question of how much of an increase is warranted is a divisive issue. Some advocates argue that anything less than a $15.00 hourly minimum denies workers a living wage. Opponents say higher wages will hurt competition and result in job cuts. In the healthcare sector, opponents also cite increased healthcare costs for patients, fewer employment benefits, and a reduced ability to provide charity care.

With hospitals and health systems often being the largest employers in a region, joining the national conversation on wages is inevitable for many healthcare organizations. Maine Medical Center in Portland, has said that a wage hike to $15.00 hourly would be fiscally unsustainable.

But Beth Israel Deaconess Medical Center in Boston, has announced that it will adopt a minimum $15.00-per-hour starting wage. And on March 29, University of Pittsburgh Medical Center (UPMC) became the latest health system to announce an increase to a minimum of $15.00 in its starting wage for hourly employees. The change is expected to become effective by January 2021, with the wage rising gradually each year until then.

"We wanted to do this in a very responsible and affordable way," says John Galley, chief human resources officer at UPMC.  "Because we're such a large employer, we had to do this in a way that wasn't going to be inflationary in terms of healthcare costs."

 Galley outlines three reasons behind UPMC's decision to move to a $15.00 hourly starting wage.  

1. Recruiting and Retention

A primary driver behind announcing the wage increase was the desire to remain competitive in recruiting and retaining the region's best employees. "At UPMC, we believe in pay for performance," says Galley. Paying a higher wage is expected to attract top talent. 

The move seems to have had a positive effect. "We usually get about 8,000 hits daily on our recruitment page, but we got over to 10,000 on the day this was announced. It was an almost 25% increase, just on the first day alone," he told me.

Galley says that current employees have had questions as to how the increased pay will affect them, but the feedback has been overwhelmingly positive. While it's still early, he and UPMC's leadership believe increased starting wage to be well-received by existing UPMC workers.

Galley is skeptical that increased pay alone can improve employee engagement, but believes that competitive compensation, when paired with a supportive work environment featuring supervisors that care about their workers and treat them with dignity and respect, can create engagement.

2. Supported by Data

"We are a data-driven organization," says Galley. He and his colleagues feel confident that now is the right time to increase their organization's starting wage.

"We asked ourselves, is this change going to help us provide better value in market? Will it improve patient care and experience?"

Employers may have enjoyed a buyer's market for the last few years, but that's no longer the case. The effects of the last recession are coming to a close, and now is the time to recognize to step up efforts to retain workers.

"There was no study that said [we] needed to move the wage to $15.00 per hour, but we look at wages, we look at unemployment, we run forecasts…. We look at where we need to be. The culmination of all those studies led us to this decision," says Galley.

3. A Chance to Show the C-Suite HR's Strategic Abilities

HR doesn't always get a chance to display its strategic abilities to the organization, but adjusting UPMC's starting wage was an idea that got started in the HR suite.

"The initiative was born by HR," says Galley. "HR worked to study the market, to do the forecast, to develop and price the plan."

UPMC's leadership and other departments got into the act early on and were supportive, says Galley, but this was an opportunity for HR to go to bat for the health system's employees and flex the department's long range planning and strategizing muscles. "All the rigor in creating and promoting the business case was developed by HR."

Adopting a $15.00 hourly starting wage is not a goal that is right for every hospital or health system, says Galley. "Each business needs to evaluate this on their own. We're not saying that what we're doing at UPMC is right for everyone else."

But Galley has this advice for organizations considering taking the plunge. "Be bold. Dream big, and don't be afraid to take big ideas forward."

Lena J. Weiner is an associate editor at HealthLeaders Media.

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