On October 13, 2023, California Governor Newsom signed into law SB 525 increasing the minimum wage for health care workers in California to $25.00 per hour. The new law represents the cumulation of yearslong efforts by labor unions and healthcare employers to negotiate a wage increase for nearly 455,000 workers across the state.
Background
Following the passage of several local laws raising the minimum
wage for health care workers, the health care industry reacted by
qualifying referendums to ask voters to block these increases. In
response, the health care workers labor unions qualified a ballot
initiative in Los Angeles County seeking to limit the maximum
salaries for hospital executives. In an effort to find common
ground, health care employers agreed to support SB 525, and the
unions agreed to a 10-year moratorium on efforts to force pay
raises at hospitals and other medical facilities through ballot
initiatives. The new state law will effectively preempt those local
minimum wage increases passed by any counties.
Despite this support, some had speculated that Governor Newsom
would not sign SB 525 over concerns that the bill might impact the
state's budget by potentially increasing (in the billions) its
reimbursement to healthcare providers under California's
Medicaid program. However, since almost half of low-wage health
care workers and their families use these publicly funded programs,
researchers at UC Berkeley and labor unions posited that the
increase in wage and reimbursement rate would likely be offset by
the savings that state would realize by certain healthcare workers
no longer requiring the use of publicly funded programs.
Glide path to the new minimum wage
Under the new law, medical technicians, nursing assistants, custodians, and other support staff will see a gradual wage hike beginning next year; however, the rate of increase will depend on the type of health care facility in which they work. For example, some community clinics will be required to implement a $21 hourly minimum wage in 2024 and reach $25 by 2027, while dialysis clinics and large health systems with more than 10,000 workers will be required to increase the hourly minimum wage to $23 in 2024, $24 in 2025, and $25 in 2026. Hospitals with a high mix of Medi-Cal and Medicare patients, as well as rural independent hospitals, will be required to pay workers $18 per hour in 2024, with 3.5% annual increases until the minimum wage reaches $25 in 2033. Finally, other health care employers will be expected to step up their hourly minimum wage to $21 in 2024, $23 in 2026 and $25 by 2028.
It is important to highlight that the scheduled increases are not required to be proportional based on current worker wages. Therefore, more senior and experienced health care workers who currently receive an hourly wage close to the scheduled increase for 2024 could be making the same as entry level employees come next year.
From a practical perspective, all employers of health care workers in California will need to update their pay structures in order to comply with the law, based on the facility type.
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