February 14, 2018
Spotlight on Poverty & Opportunity, February 14, 2018
Health care, an important source of jobs in the US economy, accounts for nearly 13 percent of private sector employment. Unfortunately, despite rapid job growth in the sector, we’ve also seen wages of many healthcare workers in this critical area of our economy stagnate. Understanding this phenomenon and the factors that may have caused it, including decreased union participation and a shift in bargaining power from workers to employers is important for boosting health sector wages and potentially understanding some of the sources of growing inequality in our broader economy.
Since 2005, employment in health care grew by 20 percent. Hospitals provide the lion’s share of jobs but grew by just 10 percent. The much smaller outpatient care segment grew six times faster, with employment increasing by nearly 60 percent. In 2015, the 5 million health care professionals were outnumbered by 5.5 million workers in two non-professional occupational groups — 2.1 million medical technicians and 3.4 million health aides and assistants.
Although robust job growth persisted through the financial crisis and beyond, wages of non-professional health care workers have stagnated. Median real wages of medical technicians working full-time in hospitals fell from $22.00 in 2005 to $21.60 in 2015; in outpatient facilities, their pay fell from $17.84 to $17.67.
Education is often seen as something of a panacea for higher wages but here it does not seem to be the culprit. Improvements in educational attainment for health aides and assistants over the 2005–2015 decade were dramatic. Many of these workers were poorly educated in 2005 — 41.4 percent in hospitals and 32.5 percent in outpatient facilities had a high school degree or less. By 2015, these shares had fallen to 29.4 percent in hospitals and 22.9 in outpatient care.
The share of these workers with some college education rose from 48.4 to 56.5 percent in hospitals and from 55.2 to 59.4 percent in outpatient facilities. By 2015, 62.5 percent of health aides and assistants in hospitals had some college or a four-year degree; more than three-quarters (77.1 percent) in outpatient care had this level of educational achievement.
Nevertheless, median real wages of full-time, full-year workers fell from $14.87 to $14.72 in hospitals and rose by a penny from $14.27 to $14.28 in outpatient facilities over the decade. Despite rapid advances in education, these workers were still earning less than $15-per-hour in 2015.
Rapid job growth and rising levels of education are often presented by policymakers as the cure for low wages. But the experiences of health care workers challenge this conventional wisdom. What, then, can explain the failure of wages to increase despite rising employment and educational levels?
The change in union density in these occupations may be one factor. The Bureau of Labor Statistics reports that union density for support occupations, which includes medical technicians and health aides and assistants, fell slightly from 13.0 percent to 12.6 percent in hospitals over the 2005–2015 decade. In outpatient care facilities, however, union density fell sharply, from 10.0 to 4.5 percent during the same period. Unions maintained membership in outpatient facilities, but the rapid growth in employment in this health care segment meant a steep decline in density. This fall in union density is a likely contributor to the stagnant wages of non-professional workers, and for the lower wages paid in outpatient care facilities compared to hospitals.
Another factor holding down workers’ wages may be an increase in the bargaining power of employers. In consolidated health care markets characterized by one or a few health care systems, employers may have monopoly power in the market for their services and the ability to raise prices. They may also have monopsony power in the labor market and the ability to pay lower wages. The increase in hospital mergers over the 2005–2015 decade may partly explain stagnant or falling real wages in non-professional health care occupations.
Policies that increase competition in health care markets are good for consumers; providers will have to lower prices and increase the quality of care to compete for patients. They are also good for workers; in labor markets in which health care workers have a greater choice of employers, health care organizations will have to pay higher wages to attract and keep workers.
Policies that make it easier for workers to join unions can increase the bargaining power of workers. In the absence of increases in unionization rates, public policy can set a floor under workers’ pay and living standards. Reforms such as a $15-dollar-per-hour minimum wage, universal access to health care, free higher education, and affordable quality child care will provide health care workers with greater economic security.
Eileen Appelbaum is Co-Director of the Center for Economic and Policy Research and Coauthor of the CEPR report, Organizational Restructuring in U.S. Healthcare Systems: Implications for Jobs, Wages, and Inequality, that examines the experiences of health care workers over a decade of change from 2005 to 2015.