Quality Care At Risk Unless The Government Covers Higher Wage Costs

High quality care will be available only to those who can afford to pay for it, unless central government covers the extra cost of paying all care home workers the National Living Wage (NLW) the Joseph Rowntree Foundation has warned.

A new report, The costs and benefits of paying all the lowest paid care home workers in the UK the Living Wage commissioned by the Joseph Rowntree Foundation (JRF) and written by Lancaster University and the International Longevity Centre – UK (ILC-UK), has found that introducing the NLW for low-paid care home workers will cost £387 million per year, which will need to be met by central and local government as well as care providers.

The new research is the first to examine the impact of the NLW in one of the most important sectors in the UK, and shows that half, (50%), of all care workers, 300,000 people, will be eligible for a pay rise under it. Those who benefit will see their pay packets increase by an average of £462 per year, rising to £640 per year for the lowest paid. The report also finds that over three quarters (77 per cent) would benefit if their employer paid the voluntary, higher Living Wage (LW). Paying the LW would boost care workers’ pay packets by an average of £1,208, or £1,359 for the lowest paid.

The extra costs will come at a time when many care homes are already under financial pressure. However, the report finds that care homes which have mainly self-funded residents will be most able to afford wage increases brought about by the NLW under their current funding structures. The extra costs are likely to be partly offset by reduced staff turnover and training costs brought about by higher wages, and many homes will be able to pay the NLW without needing to increase fees. However, the introduction of the NLW will put care homes that have a significant proportion of Local Authority places at a financial tipping point. Local Authority funding already falls below the full cost of care, with the gap often being filled by higher fees from self-funded residents.

As Local Authority incomes and spending continue to be squeezed, the shortfall brought about by higher wage costs will become too large to fill without extra funding. Unless more money to cover the cost of increased wages is found, there is a risk that standards of care for people in Local Authority funded places will fall. The report finds that paying the NLW will boost Government coffers by bringing in £46 million more in income tax per year, and will reduce the need for welfare payments. Paying the higher, voluntary Living Wage would mean £156 million more per year in income tax receipts.

JRF is calling on central government to use the increased income from tax receipts and reduced welfare payments to help Local Authorities to pay higher NLW costs for care workers. Higher wages could also have positive effects for residents, as a more valued and rewarded care work force is better placed to provide relationship centred care.