The Harsh Wage Reality – Opportunity or Disaster?

A few weeks ago, I came across this article on Axios, flagging it as something worth writing about:?New wave of strikes will test worker power.??

Then, at The National Investment Center for Seniors Housing & Care (NIC) fall conference, Larry Summers, who was the secretary of the treasury for President Clinton and the director of the National Economic Council for President Obama, and Paul Krugman, who is an economist and Nobel Prize winner, talked about the economy.

The Wage Problem

No one wants to pay higher wages, but everyone is. There are two reasons for this:

1. There are simply a whole bunch of people who did not come back into the workforce, and their reasons are murky. Summers and Krugman suspect it is a combination of people still having savings by not spending during the pandemic; people realizing they can get by on less, coupleds allowing one partner to stay home; older people retiring early; fear; people just spending more time job hunting in order to find better jobs (wages, benefits, working environment).
2. We have inflation that seems to be more than transitory, which means things cost more and people simply need more money to pay their bills.

What is happening in all sectors is that employers are offering short-term incentives, like sign-on and retention bonuses in an effort to avoid raising wages. This will go on forever. Both Krugman and Summers believe this effort has more or less run out of steam.?

The Fix

While there are things senior living organizations can do to make working in the industry a better experience, at the end of the day,?good workers?are not going to take $1 to $5 an hour less to have a great work environment, because their first obligation has to be to themselves and their family.

Eventually, people will come back to work, come back into the workforce, when wages start going up. Wages will go up — and are already going up — in other frontline sectors, and they will go up in senior living. This is something that is already happening, but, at least in most organizations, not enough.?

Senior living operators are going to be forced to raise rates higher than they are today, and this will mean higher increases in rates. The thinking is that rates will need to go up around 10% to have a hope of staying even.

The False Premise

There is a false premise that right now, today, we cannot squeeze any more efficiency out of our workers. Meaning, if workers are caring for 10 residents a day, 11 or 13 is impossible. Maybe this is true, but I suspect that if we paid better and had the best workers — those who knew they were worth more — their productivity would be higher, residents would be happier, and occupancy would grow.

It is a ton easier for fast food or coffee outlets than senior living. Need to raise wages? Increase the price of a hamburger, fries, a Coke, and a milkshake by 15 to 50 cents, and people will barely notice. Not true with senior living.?

This is why we need to be looking at solutions that will help team members be more efficient. Robots, workflows, tapping into residents and family members as a resource beyond just writing checks.

Some operators will figure this out and thrive like never before; others will struggle like crazy or fail. We are already seeing some of that. Ultimately this is a time of great opportunity for those operators who are reinventing.