Connecting Compensation and the COVID-19 Mortality Rate in Long-Term Care Facilities

A new report published by the Washington Center for Equitable Growth, a non-profit research organization, shows how compensation impacts the safety and health of nursing home workers and residents.  Krista Ruffini, author of the study, is a visiting scholar at the Minneapolis Federal Reserve.  

The research concludes that wages have a direct influence on health, safety - and death rates in nursing homes.  Specifically, the study suggests that if the federal government increased the minimum wage by 10 percent, approximately 7,000 nursing home deaths could be prevented each year in the 21 states subject to the federal minimum.  (Currently, 29 states and D.C. have minimum wages above the federal minimum wage.) This article briefly looks at how the study was constructed along with its main findings.

Background and the Role of Compensation

A significant data point associated with the pandemic is that residents and workers in long-term residential eldercare settings account for over 40 percent of all deaths in the U.S. due to COVID-19.  As a result, the health and safety concerns of long-term care facilities is gaining serious attention by society and policy-makers.  

The Washington Center report highlights how compensation is front and center as a factor in the results of long-term care facilities. There are many issues to consider in this crisis.  The linkage of compensation to outcomes – in this case the health and safety of residents and employees – is of keen interest to compensation and HR professionals.

Inputs and Findings of the Research

As the basis for the study the author looked at data for the past 25 years and examined increases in minimum wages in locations across the country.  A model was built to compare nursing home violations, resident health and mortality at facilities located where minimum wages went up compared to nearby facilities where wages remained constant. For example, in the Chicago area a comparison would be made between DuPage and Cook Counties. 

The data shows that an increase in wages resulted in fewer violations (1 to 2 percent) and a lower number of deaths (3 percent.) 

For the facilities, a wage hike does increase expenses by the same amount of the higher labor costs. Presumably, these increased costs are passed along to residents in higher prices. 

The model in the study shows that a 10 percent increase in the minimum wage would reduce deaths in nursing homes by 3 percent.  There have been about 50,000 long-term care residents and staff who have died from COVID-19.  Based on the model, 1,500 people would have survived the pandemic if wages were ten percent higher for nursing home associates. If the group is extended to non-COVID 19 deaths, the numbers increase significantly.  

Why?

Clearly, there are many elements causing the disproportionate amount of coronavirus-related deaths in long-term care facilities.  But let’s focus on how the Washington Center’s study looks at compensation and the results compensation can produce.  Essentially, three channels are identified as ways compensation can improve patient care and firm performance.

1.      “Efficiency Wage” models indicate that paying workers a higher wage incentives better performance by making unemployment and the loss of a paycheck more “costly” to workers.  The pain is greater.  

2.      Financial pressures and stress from low wages – poverty – impair cognitive functioning. A higher wage can relieve stress, improve household budgets and overall decision-making.

3.      With higher wages, there is less turnover.  Workers stay with their employer longer, gain more expertise in the performance of their jobs, are more productive and supply better care to residents.  (For employers, there is a benefit in reduced hiring and training costs related to lower employee turnover.)

Summary

• The Washington Center for Equitable Growth study suggests that higher minimum wages for direct care staff would increase pay and tenure among eldercare nursing home staff without reducing the number of workers or the time nursing staff spends with patients.   
• Higher wages will result in reduced employee turnover, increased expertise of workers and better care. 
• The greater expertise reduces the number of health inspection violations, the prevalence of infection and the number of deaths among residents. 
• Compensation professionals may be interested in reviewing the full study for greater details about its methodology and findings at the Washington Center’s web site: www.equitablegrowth.org.