Our decisions about whom and how to tax are decisions about which community needs we have the capacity to address and at what scale. Progressive taxes like personal, investment, and corporate income taxes generate more revenue from those who have the greatest ability to pay, and for whom the cost of losing the next dollar is small, relative to the last dollar of a family struggling to make rent and afford groceries. On the other hand, regressive revenue strategies like non-strategic tariffs, fees and fines, and an overreliance on sales taxes, especially when combined with cuts to social programs, heighten the sense that the system is unfair. Where progressive revenue strategies can bind a community together in mutual support and expand capacity to meet needs through good governance, regressive strategies erode people’s trust in the public sector.

H.R. 1 presents a vision of public finance that is unsustainable and erodes trust in government

Much of the federal tax code is in fact progressively structured, but for decades conservatives have weakened and attacked that progressivity. H.R. 1 (which the White House has referred to as the “One Big Beautiful Bill Act” or “OBBBA”) is the latest Republican-led effort toward breaking down trust in the public sector and social contract. H.R. 1 provides a suite of tax breaks to households across the income distribution; however, the wealthiest households and corporations see a far bigger tax cut from the package than the typical household does. In service to these tax breaks, the bill introduces devastating cuts to Medicaid, SNAP, and critical government agencies designed to help workers and their families thrive. Despite their size and the pain they will cause, these drastic cuts in the federal government’s capacity to serve and support working families are not enough to cover the costs of the corporate tax breaks; the Tax Policy Center estimates that H.R. 1 could increase the federal deficit by between $3.7 trillion and $5.1 trillion by 2034.

But unlike the federal government, states and localities cannot run budget deficits; their budgets must be balanced yearly. When major federal cuts happen, states and localities that rely on federal dollars to maintain critical services are forced to curtail and eliminate services, dive into emergency savings where they exist, or else shift to revenue generation strategies that often fall disproportionately on Black, brown, and poor households. The combination of directly hampering public services working people rely on while shifting more of the burden of raising revenue toward Black, brown, and poor workers and their families weakens worker power and exacerbates racial disparities.

H.R. 1 combines a shift toward regressive revenue strategies with massive tax breaks to corporations and the wealthiest households, in service to the Trump administration’s overarching goal: reasserting white, wealthy, and corporate privilege through tax cuts, deregulation, and the defunding of public institutions.

Regressive revenue strategies: Taking from the poor to give the rich even more breaks

The Trump administration has floated using tariffs as a replacement (either in full or part) for the federal income tax. This is not a new Republican strategy: Tariffs are a kind of consumption tax (on imported goods, along with the intermediate products businesses need to create goods and provide services domestically), and Republican-led state governments tend to rely more on consumption taxes1 (like sales taxes) and less on income taxes to increase revenue. Because poorer households spend a larger share of their income purchasing goods and services than the rich do, consumption taxes are inherently more regressive. The current federal income tax is progressively structured, in spite of the ways conservatives have attempted to weaken that progressivity over time. While tariffs can be a sensible part of a larger industrial policy strategy, governments place too large a burden on low- and moderate-income households when they try to use consumption taxes as a primary source of revenue. 

States and localities may turn to fines and fees to raise revenues in the absence of adequate federal support. These penalties are a poor substitute for progressive taxes. Fines and fees historically have only been able to cover a small fraction of state and local budget costs. And this is baked into the design: If the point of a fine or fee is to deter behavior, the best-case scenario (ending the behavior) would result in no revenue.

Even so, fines and fees cause significant economic pain for working-class families in the Black communities that are most affected by them. On an ethical level, a modern idiom applies: “If the penalty for a crime is a fine, that crime only exists for the poor.” The criminal justice system can trap poor folks in a cruel cycle of penalization for being unable to pay traffic tickets, court fees, and even their own surveillance through ankle monitors. Fines and fees increase the economic burden on those with the least ability to pay, all for a low return, making them a poor substitute for broad, progressive taxes.

Faux-progressive revenue strategies are ineffective and distract workers, their families, and policymakers from the need for real change

Ineffective tax gimmicks like temporary deductions on overtime and tipped income distract from the need for real reform around worker pay and scheduling. The point of requiring businesses to pay time-and-a-half for overtime is to discourage pushing workers to work beyond what we have collectively decided is a full and reasonable period of labor. Tipping is an outdated practice with racist roots, designed to shift the cost of maintaining a workforce onto consumers, rather than having employers properly compensate employees. Instead of cynically gesturing toward affordability through encouraging bad business practices, we should empower workers to fight for better wages and consistent scheduling.

Conservatives may also try to balance budgets by allowing progressive tax expenditures to expire (e.g., the recent expiration of the ACA premium tax credits or the expiration of the expanded child tax credits passed as pandemic relief). Temporary tax breaks themselves are not the most effective means of addressing structural economic issues; if health care or health insurance is persistently inaccessible to wide swaths of the population, we should seek to remedy that by making access universal—or, at the very least, making the credits that allowed greater access in the first place permanent. Allowing tax breaks implemented to address structural inequities to expire without an alternative solution to the problem being addressed is negligence. There are ways to balance budgets that do not involve reversing hard-won progress toward equity.

Progressive ways to generate revenue: Worker-centered tax policies can reduce inequality and expand the tax base

There are better ways of raising revenue that will support workers and their families, rebuild public trust in government, and get us the public goods and services we want and need. Since most Americans earn their living through selling their labor, it makes sense to keep some progressive tax on income to ensure people remain invested in the social contract. But with so much wealth and income concentrated amongst a few individuals, a necessary step is shifting more of the tax burden toward extremely high earners, wealth, and investment income. This will generate more revenue to improve public services and infrastructure, while tamping down on inequality. Adding tax brackets for the highest earners, adopting a legitimate tax on wealth holdings, and taxing the income made from investments at a rate closer to that of income from wages and salaries progressively raise revenues without increasing the burden on most U.S. households.

Proper enforcement of the current tax code would go a long way toward improving both our ability to raise funds and the public’s trust in public finance. The tax code is rife with opportunities for wealthy individuals and corporations to evade paying their fair share of taxes, allowing them to skirt holding up their end of the social contract. The IRS is also critically underfunded and recovering from recent staff reductions from the Trump administration. With enough resources to enforce existing tax law effectively, the IRS could go after the largest tax evaders and see returns that matter, as opposed to disproportionately targeting Black households without the funds to instigate a drawn-out legal battle over an audit.

Table 1

We need a tax code that supports states and localities and promotes full economic participation, not temporary tax gimmicks and handouts to the wealthiest

Taxpayers (literally) cannot afford to accept the conservative propaganda that all taxation is a burden on households. Taxes are one way of binding a democratic community together and allowing us to share in the costs of creating collective prosperity and community. Especially at the state and local levels, tax revenues are essential to providing the services people need to thrive. When federal funding gets pulled back and states and localities turn to regressive revenue strategies, it is working-class families who pay the price.

If we are going to rebuild a sense of trust in the social contract, we need to structure the tax code such that it becomes more progressive, tapping into a greater portion of the massive amounts of wealth and income that have pooled at the top. We can use that revenue to fund programs and new infrastructure that allow more people to fully participate in the economy:

• improved funding for public schooling, increasing teacher pay and quality of education
• a fully funded federal food assistance program, and/or adequate funding to states to support their own cash-assistance programs more comprehensive than Temporary Assistance for Needy Families (TANF)
• expanded access to and adequacy of Medicaid, or Medicare for All

Each of these initiatives could improve affordability and remove the need for state and local governments to pursue revenue regressive strategies that do more harm than good (like fines and fees). We won’t solve every structural inequality and eliminate all disparities through reforming the tax code; but building the resources and will to collect taxes in a progressive way are steps toward a fairer economy and a government that earns the public’s trust.

1. Consumption taxes have some potential uses. Carbon taxes, for example, tax the consumption of goods whose production intensively uses greenhouse gas-emitting inputs; if consumers look to avoid these goods by switching to others whose production involves fewer greenhouse gas emissions, we achieve an important social good.

The nursing home industry has attempted to equate a staffing decline with a worker shortage. But this decline mirrored a decline in occupancy, and, if anything, suggests that there’s a pool of sidelined workers who could be lured back if pay and working conditions improved. This is true in both urban and rural areas.

The industry trade organization issued a report that described the 13.3% decline in nursing home jobs during the pandemic as a “workforce shortage” causing “wage increase pressures and reliance on contracted or agency nursing.” But this was a decline in jobs, not in available workers, as 168,579 residents died and would-be residents opted for alternative care arrangements due to the rapid spread of COVID-19 in facilities. It’s misleading to characterize reduced demand as a workforce shortage when staffing ratios actually improved somewhat during this period.

Tellingly, staffing levels are lower in for-profit nursing homes compared with other ownership types. As we document in our comment, for-profit nursing homes, which dominate the industry, provide fewer nursing hours per resident per day (3.6) than government (4.2) and non-profit facilities (4.3). For-profit facilities also have higher rates of turnover.

While there’s no evidence of a widespread worker shortage, there is a pay shortage. EPI found that nursing homes pay registered nurses and aides less than other health care providers.

Many aides earn poverty-level wages despite difficult working conditions. It’s difficult to explain a national shortage of workers in an occupation that doesn’t require highly specialized skills or training, unless the supposed “shortage” stems from the fact that employers aren’t offering pay commensurate with the demands of the job.

Increased workloads and unsafe conditions also induced many registered nurses to quit or retire early during the pandemic and contributed to the first decline in nursing school enrollment in 20 years. Staffing standards would help nursing homes attract and retain nurses by improving working conditions.

Our analysis suggests that short-term workforce shortages are unlikely, and long-term shortages can be averted. Rather than indicating a nationwide shortage of trained staff, the recent downturn in employment suggests that there’s a pool of experienced workers who could return to nursing homes if pay and working conditions improved.

The industry lobby says that low staffing levels aren’t due to profit-seeking, but rather a shortage of workers. However, the supposed “shortage” is self-inflicted. As we explained in a public comment on the proposed rule, nursing home workers are grossly underpaid and overworked. Declines in nursing home employment also reflect a shift toward home- and community-based services (HCBS) that accelerated in the wake of the COVID-19 pandemic, which devastated nursing home residents and staff.

Nursing home care is expensive, yet many homes are dangerously understaffed

The annual cost of nursing home care is around $100,000, far more than most seniors can cover with savings and income. Since most people who need long-term care for extended periods run out of money, the government is the main source of funding for nursing home care and HCBS.

However, Medicare only covers short rehab stints after hospitalization, while Medicaid only picks up the tab after people have drawn down other resources. Since private long-term care insurance is expensive and provides limited coverage, all except the wealthiest households risk being impoverished by long-term care needs, though Medicaid at least guarantees access to nursing home care when other funds run out. The Biden administration’s proposed American Jobs Plan included $400 billion in funding to allow more people to obtain home-based care instead of being forced to live in a facility, but this didn’t make it into final legislation.

Despite nursing homes’ high cost, aides who provide most of the hands-on care earn poverty or near-poverty wages while enduring harsh working conditions. The average aide assists 13 residents. Most aides are women of color, including many immigrants. Workers suffered high illness and injury rates even before the pandemic. Turnover is high—fewer than half of nursing home workers last a year on the job—and affects the quality of care.

What are we getting for the $100 billion Medicare and Medicaid spend annually on nursing homes and similar care provided in continuing care retirement communities? Though it may seem hard to believe, there are no strict requirements for how much care is provided in nursing homes even when taxpayers foot the bill. Much of the money flows to for-profit companies who own 70% of nursing homes and have an incentive to minimize costs at the expense of residents.

Private equity owners are among the worst offenders because they focus on maximizing short-term profits and have fewer reputational constraints. The private equity business model often targets sectors such as newspapers, hospitals, and nursing homes where previous owners had invested in building and maintaining reputations for quality products and services. The new owners take advantage of lingering goodwill and workers’ sense of responsibility while gutting staff and engaging in self-dealing, such as selling facilities to companies controlled by the private equity partners and then charging inflated rent for their use.

Real estate sale-leasebacks and other related-party transactions hold several advantages for private equity partners in nursing home deals. These include hiding profits and shielding assets from creditors in case of bankruptcy or litigation, including wrongful-death lawsuits. High rents and fees from such transactions may be passed on to payers, including Medicaid and Medicare, while proceeds aren’t equitably shared with pension funds and other partners in the deal who put up most of the money and bear almost all the risk.

Though poor health and safety records and bad press coverage may eventually catch up with unscrupulous nursing home owners, they can continue to do business by changing names and hiding behind complex ownership structures. In addition to proposing a minimum staffing standard, the Biden administration has also moved to increase transparency in nursing home ownership given the evidence that private equity and real estate investment trust ownership is associated with poor quality of care.

Unscrupulous nursing home owners take advantage of the fact that residents may have limited options. Medicaid tends to pay less than Medicare and private payers, and, in some states, may not cover the cost of quality care. Higher-quality nursing homes may therefore limit the number of Medicaid beds even while nursing homes that provide substandard care are able to earn a profit. The result is frail nursing home residents—disproportionately people of color—languishing in dangerous homes and cared for by guilt-ridden, stressed, and underpaid workers.

A minimum staffing standard is long overdue

Federal law currently requires only that nursing homes be supervised by a registered nurse (RN) and provide “sufficient” staffing, a standard that isn’t defined or enforced. Some states do better, but all jurisdictions except the District of Columbia require less than the 4.1 hours of total nursing care per resident per day that many experts recommend based on a 2001 study commissioned by the Centers for Medicare and Medicaid Services. Actual care provided varies widely across states, from an average of 3.3 hours in Missouri and Texas to 7.5 hours in Alaska.

The proposed standard isn’t perfect. It’s presented as a compromise between improving resident well-being and preserving access to care given industry claims of worker shortages. It requires nursing homes to have an RN available around the clock in addition to providing at least 0.55 hours of daily RN care and 2.45 hours of daily nurse aide care per resident. While 24-hour RN supervision is an improvement over many previous recommendations, total nursing care prescribed in the proposed standard falls short of 4.1 hours per resident. The proposed standard also fails to include a role for licensed practical nurses, who could end up being laid off in favor of aides.

The nursing home lobby—the American Health Care Association (AHCA)—is trying to derail the proposed standard, saying it would have “disastrous results” by failing to improve quality while potentially displacing hundreds of thousands of residents. But the industry is grasping at straws. For example, it trumpets the fact that a study backing the proposed standard finds no “specific threshold” where quality improves or declines. But the reason the study finds no specific threshold is because health and safety improve with staffing at every level examined, including levels well above the proposed standard. This is hardly an argument against a minimum standard; instead, it’s an argument that tougher standards would yield substantial health and safety benefits.

Industry claims of a worker shortage are equally unfounded, relying on the fact that the workforce shrank during the pandemic as nursing home occupancy plummeted. AHCA says that 15% of nursing home workers left or lost their positions during the pandemic, but this reflects reduced demand for workers, not short supply, as hundreds of thousands of residents and would-be residents died in nursing home outbreaks and others fled or avoided the facilities due to the high risk of COVID-19 infection. If there were an actual worker shortage, nursing homes would be bidding up wages, but nursing home wages have been flat even as workers in other industries have seen gains in a tight labor market. If anything, the fact that the industry has shed workers suggests that there’s a pool of trained workers who could be hired back, especially if pay and working conditions improved. A similar illogic is evident in the claim that rural hospital closures—which are often due to states’ refusal to expand Medicaid under the Affordable Care Act and other financial factors—are evidence of labor shortages that would also affect nursing homes. Instead, these hospital closures would likely have increased the pool of available nurses and aides in these areas.

It’s true that the nursing home industry is in decline, a process that accelerated during the pandemic. But this is a positive trend if more seniors can access better and more cost-effective care at home. Whether or not a federal staffing standard causes more nursing homes to close their doors, as the industry warns, residents may be better off in different care settings. While the industry lobby points to the fact that 38% of nursing homes that closed during the pandemic had four- or five-star ratings, our analysis of August nursing home data finds that 57% of all nursing homes received such ratings, indicating that lower-rated homes were more likely to shut down.

The industry’s warnings of large-scale displacement are almost certainly overblown, since they can’t point to evidence that this happened in states that implemented stricter standards. Studies looking at the experiences of New Mexico, Vermont, and New Jersey found that nursing homes affected by stricter standards were no more likely to close than those already in compliance. Similarly, careful research has found that state and local minimum wage increases didn’t cause nursing homes to shut down but did reduce turnover among low-wage employees and improve residents’ health outcomes, including lower mortality rates. Since nursing home occupancy has rebounded but remains below pre-pandemic levels, any consolidation that does happen would result in efficiency gains by reducing overhead costs per resident. Adequate staffing could also help repair nursing homes’ tarnished reputations and slow their decline.

The staffing standard is critically important, notwithstanding the nursing home industry’s unconvincing arguments

It’s highly unlikely that the rule will cause widespread shuttering of nursing homes and reduce access to quality care as the industry claims. However, ownership changes in existing facilities are both likely and welcome, as the greediest owners will exit the industry. It’s scandalous that the public is paying for-profit companies to care for vulnerable seniors without setting minimum standards for care or understanding where the money is going. The Biden administration’s proposed rules for nursing home staffing and transparency are critical to fixing this broken system.

The industry’s attempt to derail the proposed staffing rule by claiming a widespread worker shortage is outrageous given that the industry continues to pay workers below-market and often poverty-level wages for difficult and dangerous work. The decline in employment that the industry cites as evidence of a shortage is mostly due to a decline in the number of residents—a trend that reflects a preference for aging in place as well as the inadequate care offered in many nursing homes, especially during the pandemic. To the extent that workers fled or were sidelined by illness during the pandemic and would need to be lured back with higher pay and better working conditions, this is a welcome corrective and not reason to weaken the standard.

In this report, we focus specifically on two occupations in the care industry: early child care and education (“child care”) and home health care. The workers in these two occupations are overwhelmingly women and disproportionately Black, Hispanic, and Asian American/Pacific Islander (AAPI) women and immigrant women. Systemic racism, sexism, ableism, and xenophobia, in the form of labor market discrimination and occupational segregation, mean that these essential workers have little bargaining power, resulting in average wages half the amount of average wages for the workforce as a whole.

The 2020 pandemic and recession laid bare just how inefficient and cruel the existing care system is. It is unaffordable for many families—including the families of care workers themselves—while simultaneously stranding many care workers in poverty. Given the high-contact, personal nature of care work, child care and home health care workers were among the workers most impacted when public health concerns forced shut schools, day cares, and businesses. The impacts of the recession—including income loss and large shares of women having to leave the workforce to manage caregiving responsibilities at home—left care workers in even more financial insecurity and stress than they were already facing.

While policymakers and the administration have recognized the urgent need to pay care workers more equitable and sustainable wages, determining a fair wage standard presents some challenges. This report builds a framework for thinking about how to set higher wages for care workers. As noted above, we focus our analysis on workers within two occupations in the care industry: child care, also referred to as early child care and education (ECE), and home health care.

First, we discuss the historical and ongoing systems of oppression that have influenced the development of the care sector, and we provide an overview of who care workers are in terms of demographics. These are some of our key findings:

• The development of the care sector and disparities within the care sector are fundamentally intertwined with historical and current ableism, sexism, xenophobia, and racism. Globally and in the U.S., care work has been devalued as “women’s work” and is primarily performed by women who face discrimination across other identities, such as immigrant and/or Black and Hispanic women. The devaluation of care work itself, along with the additional layers of discrimination many care workers face, in turn influence and perpetuate low wages and poor conditions in this industry.
• The average wage for early care and education workers and home health care workers is $13.51 and $13.81, respectively—about half the economywide average hourly wage. For a full-time worker, this translates to less than $30,000 a year.
• Care workers are less likely to receive nonwage benefits than the workforce as a whole: Over half of workers overall have employer-sponsored health insurance, compared with one-fifth of child care workers and one-quarter of home health care workers. One-third of workers overall have retirement benefits compared with only about one in 10 child care workers and one in eight home health care workers.
• Child care workers are overwhelmingly women (94%) and disproportionately Black (15.6%, compared with 12.1% in the overall workforce) and Hispanic (23.6%, compared with 17.5% in the overall workforce).
• Similarly, home health care workers are also largely women (88.6%) and disproportionately Black (23.9%) and Hispanic (21.8%).
• More than one in five child care workers and roughly three in 10 home health care workers were born outside the U.S.

Building off existing literature on care work and pay penalties, we create and present a set of benchmarks for setting wages for child care and home health care workers. Key findings in our investigation of appropriate benchmarks include the following:

• A minimum standard for care workers is a wage that would allow them to support a young child on just their own wages in the least expensive metro area. We calculate this minimum living wage to be at least $21.11 per hour.
• A standard that reduces the penalty for doing care work; reduces the penalties care workers face because of gender, race/ethnicity, or on the basis of their citizenship status; and adds the premium they would receive if they were unionized, yields a wage starting point for home health care and child care workers of $22.26 and $21.90, respectively.
• Using our peer countries as models, not only for wage standards but also for standards of access to care, we find a wage benchmark for home health care workers of $25.95.
• Using other early educators as a model while reducing the pay penalties those early educators themselves face, we find child care workers should be paid at least $25.30.
• Higher wages must go hand in hand with other nonwage benefits such as paid leave, health insurance, and retirement benefits.

We conclude with an analysis of the economic costs incurred from the current care system and the economic benefits of paying higher wages:

• Higher wages would drastically improve care workers’ lives and financial security, allowing them to cover their costs (including the costs of care) more easily.
• Better pay translates into higher retention, lowered turnover, and increased possibility for recruitment, which all help employers as well as care workers, who bear the burden of short-staffing and constant change.
• Those receiving care, including people with disabilities, older adults, and children who are entrusted to care workers, would benefit from the stability of a more secure care workforce.
• Investing in early child care and education has been found to have a range of positive macroeconomic benefits, including a stimulus effect from increased spending by care workers; an increase in women’s labor force participation and parental earnings, as access to child care allows parents to reenter the workforce; increased earnings in adulthood for children who are in ECE programs, as well as intergenerational effects on their children; more jobs created; and a consistent positive impact on the economy.

Investing seriously and significantly in care infrastructure—in which higher wages for care workers is a key plank—would be transformative. Given that a public role already exists in this sector, the barriers to implementing this are not as steep as they would be otherwise. The foundation has already been laid. Given this foundation, policy action could have an especially positive and determinative effect on raising care wages.

Meaningful public involvement is not just a matter of more funding, but also of taking an active role to help enforce stronger labor protections and new wage standards. Many of our peer nations with better-functioning care sectors model a more comprehensive public role in which the state is involved in decisions about what care benefits will be made available to its residents in tandem with enforcing healthy working conditions and ensuring better compensation for care workers.

A greater public role in codifying and investing in higher care wages can make this sector and the U.S. economy as a whole fairer and more efficient. Raising care wages not only represents a critical opportunity, but it is also a long overdue moral responsibility. Care workers deserve to share in the economic security and happiness that their work helps to provide for millions of people.

Background on child care and home health care workers

Often called “the workforce behind the workforce,” care workers—whether those providing care to elderly or disabled adults or those providing early care and education to young children—are a vital pillar of our economy and society. Care workers are present in people’s lives every day and their work impacts nearly every person across the nation at one time or another. Care workers span many different occupations, have different qualifications, and have varied job responsibilities. While insufficient pay, benefits, and respect is pervasive across care jobs, it is important to recognize that the industry is not a monolith. This report focuses specifically on two vital care work professions: home health care and early child care and education.

Who are home health care workers?

Home health care workers can generally be split into two groups: those who are “agency-based”—paid through a Medicare-certified home health care agency, but working in clients’ homes—and those who are paid directly by clients (Wolfe et al. 2020). Over half of the funding for long-term direct care comes from Medicaid reimbursements (Campbell et al. 2021).

Home health care workers provide a range of personalized and client-specific supportive services to people with disabilities and elderly adults. Home health care is often the lynchpin that allows these clients to remain in their own homes and live as independently as possible, rather than having to move into a residential care facility (SEIU 775 and CAP 2021). Research has shown that home- and community-based care, of which home health care is a subset, also supports and alleviates the physical, emotional, and economic strain put on family caregivers (Women Effect Action Fund and NDWA 2021).

Home health care workers’ day-to-day work encompasses a wide range of physically demanding and deeply specialized tasks, including managing medication, grocery shopping, laundry, cooking, cleaning, helping clients with getting dressed or transported, and more. These are all life-enriching tasks that require strong communications skills as well as an intuitive awareness of client needs.

Who are child care workers?

We also examine early child care and education workers. Child care is funded through a range of sources, including government block grants such as the Child Care & Development Block Grant (CCDBG) program, Head Start, and Temporary Assistance for Needy Families (TANF), as well as financial payments from parents or other family members.

Like home health care work, early child care and education work is highly skilled and labor intensive. Child care work has long been devalued as just “looking after” children, when in reality, child care combines education with skill development and acquisition. As an early educator herself says, “We do more than teach, we build” (Boldin-Woods 2021). Child care workers are early educators who nurture, educate, foster developmental and language skills, and more.

The skills required to be successful early child care educators vary widely with the ages of those they are caring for, as each age group—from infant care through grade-school-aged children—requires different levels and methods of care. Care of very young children and infants can be physically and emotionally demanding.

Where does current funding come from?

The existing U.S. landscape for funding of care work is an interconnected web of different public funds combined with private pay, and the sources of funding vary widely by state and sector. Funding may come from means-tested public programs such as Medicaid or TANF, public universal benefits such as Medicare Advantage (for long-term care), private insurance, or private pay from parents and households (Campbell et al. 2021).

In some cases, the costs are borne more on one side: Estimates show that about 60% of child care costs are borne by parents and 40% are paid through various government sources (U.S. Treasury Department 2021; Oncken 2016). The funding system is especially complex given that within states there is much variation and recent experimentation with child care provision, from subsidy block grants to universal pre-K programs.

Separate measures of home- and community-based care show that 58% of these costs are funded through Medicaid (Campbell et al. 2021; Women Effect Action Fund and NDWA 2021). Exact breakdowns are hard to calculate, and it is likely many people use a mix of personal funds and funds from government programs such as Medicaid, the Child Tax Credit, TANF, and others. But the bureaucratic burden of applying for these funds, along with often unnecessarily stringent work and eligibility requirements, also means that many who should qualify for, and are in need of, these public funds do not receive them.

What is clear is that both child care and home health care have existing public funding pipelines and infrastructures. This preexisting public role means that there is strong potential for increasing the effectiveness of these systems through significant public investment (Gould and Blair 2020).

Public grant programs are one of the main ways households with lower incomes can access and afford child or elder care, so increasing funding for these programs (and thereby decreasing the cost burden from private, personal sources) is an equity issue. If we don’t make care more affordable through public investment, care will become increasingly unaffordable for these lower-income families (EPI 2020). Child care is also becoming increasingly unaffordable for middle-income families. And yet, despite being so expensive to access, the care industry is simultaneously unable to provide decent jobs to those doing this highly sought-after work. All of these concerns point to the need for increased government investment.

A strong public role can also ensure greater funding for enforcement of labor standards and working conditions. The care sector is notorious for workplace violations (as well as employee misclassification) leading to lowered or even stolen wages (Looman 2021).

Finally, it is important to note that higher government funding on its own does not always lead to equitable outcomes. Without safeguards and guidelines, states may misdirect or waste funds (Chappell 2020). Agencies must also enact provisions to ensure that federal funds actually reach the care workers themselves and not administrators or owners (CSCCE 2021).

The current economic situation of child care workers and home health care workers—a snapshot of low wages and benefits, poor working conditions, and little worker power—did not develop overnight or in a vacuum. Rather, the care landscape and resulting treatment of care workers is the result of a long history of devaluing care work and care workers.

Systems of oppression devalue care work and care workers

Care work allows humans to survive and thrive across generations. It encompasses tasks that can seldom be forgone or fulfilled without workers. Yet our societies and economic orders acutely undervalue care work and discredit how vital it is to our lives. This devaluation of care work is deeply rooted in ableism, sexism, xenophobia, and racism. We cannot remedy the precarity and immiserating wages associated with care work without acknowledging how these systems of discrimination shape the conditions of care work.

The gendered nature of care work

The undervaluation of care work—and of the people who predominantly shoulder care work—is a global phenomenon. Across the world, women do significantly more care work than men, both unpaid care work and in care occupations (Coffey et al. 2020; Addati et al. 2018; Connelly and Kongar 2017). Within the paid care sectors, women make up two-thirds of the workforce globally (Coffey et al. 2020). In the United States, the vast majority of care workers are women, as shown in Figure A. While women make up 46.9% of the entire workforce, they make up 88.6% of the home health care workforce and 94.0% of the child care workforce. On the whole, women are overrepresented twofold among care workers relative to their share in the overall U.S. workforce.

Figure A

There is an intrinsic connection between unpaid and paid care work. Care provision has historically been unpaid reproductive labor1 that women have done for generations, mostly within households, and without the dignity and valuation given to other work done in the productive structure of capitalist economies (Glenn 1992). Paid care work is the commodification of this work that has been traditionally treated as “women’s work” and given little to no status. Working conditions and low pay for paid care jobs reflect this, including the extent of scrutiny and suspicion regarding whether they are “skilled” jobs. Thus, care work in itself is treated as having little social value—and is therefore not well rewarded—despite how essential it is.

Through intense organizing efforts, advocates for care workers have sought to challenge these prevailing narratives and working conditions—and have made some headway (NDWA 2019). Unfortunately, workers in most care occupations still suffer from low wages, poor working conditions, and lack of dignity in the work they perform. However, the brunt of this is not equally felt. We see this when we further analyze the demographic breakdown of the care workforce below.

The gendered nature of care work is true for almost all occupations within the paid care industry: Care work is overwhelmingly performed by women. A select few care occupations, most notably doctors, break from these gendered and racialized trends, and these occupations have been able to secure prestige and higher pay, in part by limiting entry into these professions and setting strict education standards and licensing requirements. The ability for these handful of professions to attain and maintain leverage, along with the accompanying higher pay and prestige, are in themselves reflections of social hierarchies and power dynamics.

Historical racism and sexism underpin the composition of the care sector

Around the world, gender discrimination is compounded by discrimination based on other identities including race or ethnicity, class, and immigration status (Coffey et al. 2020). In the care workforce, we observe a concentration of workers who face discrimination across not just one, but across multiple identities: Not only is care work overwhelmingly performed by women in the U.S., but care work is also disproportionately performed by Black women and other women of color. And, as we discuss in the following section, many of these workers are immigrants (of varying statuses) as well.

The concentration of exploited groups in care occupations is part and parcel with the devaluation of care work as a profession. And the consequences of being subordinated across multiple identities reinforce and amplify one another and are reflected in the observed outcomes—low wages and poor working conditions—we see in the care industry.

Figure B expands on Figure A by disaggregating women into five groups by race and ethnicity: Hispanic women of any race, non-Hispanic white women, Black women, Asian American/Pacific Islander (AAPI) women, and women of another race. Compared with their shares in the workforce overall, Black, Hispanic, and AAPI women are far more likely to be home health care workers. In particular, Black women are more than four times as likely to be home health care workers relative to their shares in the workforce overall. Similarly, white, Black, and Hispanic women are overrepresented in the child care workforce.

Figure B

Care work being predominantly borne by women of color dates back to slavery (Glenn 2012). In the second half of the 19th century and onward, Black, Mexican American, and Chinese American women served as inexpensive sources of labor in a growing market for workers to do the in-household care work that formerly enslaved people used to do (Glenn 1985; 1992). In the 20th century, care work became increasingly commodified in jobs outside the household as well. The composition of the resulting workforce was formed along both gender and racial lines, specifically at their intersection. The racial- and gender-motivated maltreatment of these workers translated into lack of protection and abysmal pay in these roles.

This racial- and gender-based discrimination had significant long-term structural, legislative, and policy impacts. For example, domestic workers were excluded from most New Deal reforms and denied access to unemployment insurance and other social insurance benefits provided to other workers (Wolfe et al. 2020; Edwards 2020). Only in 1974 were some private household domestic service workers incorporated under the Fair Labor Standards Act and made eligible to receive the federal minimum wage (Derenoncourt and Montialoux 2021). Unfortunately, Labor Department regulations issued shortly thereafter explicitly exempted “companionship” workers—those who serve as paid companions for elderly or disabled persons (NELP 2015). After fierce lobbying and organizing efforts, the rules were eventually broadened to include most home health care workers (Connolly 2015). The low (or no) wages, abysmal working conditions, and lack of empowerment in this industry that we still observe today are deeply entrenched in our history and economic framework.

Xenophobia shapes care workforces globally

Immigrants are frequently more concentrated in care professions relative to their shares in a country’s population or workforce. For some immigrants, language barriers, racism, and immigration status limit their employment opportunities and constrain them to take care jobs that are ill-paid and afford them little dignity as workers.

Immigrant workers are frequently overqualified for the care jobs they perform. Many have levels of education and advanced qualifications that are much higher than the qualifications required for their current jobs (Global Ageing Network and LTSS Center 2018). But medical degrees obtained elsewhere are often discredited or dismissed in their current country of residence—so if they want to use their training and continue doing health care in some form, these lower-paid care jobs become their only option.

Immigrants are disproportionately likely to be domestic care workers—working in people’s homes—facing especially precarious job circumstances. Globally, one in five paid domestic workers are migrants (Coffey et al. 2020). In the U.S., more than one in five child care workers and roughly three in 10 home health care workers were born outside the U.S.—either naturalized U.S. citizens, permanent residents, undocumented immigrants, or temporary migrant workers employed through “nonimmigrant” visas. As detailed in Figure C, while women who are naturalized U.S. citizens account for just 4% of the workforce overall, they make up 13.9% and 9.8% of the home health care and child care workforces, respectively.

Figure C

This overrepresentation extends to noncitizens. There are a few “nonimmigrant” visas that allow U.S. employers to hire domestic workers or child care workers temporarily. These include a specific program under the B-1 business visitor visa, as well as A-3 and G-5 visas (Thrupkaew 2021). Perhaps the most well known is the State Department’s au pair program, which is part of the broader J-1 visa program for “cultural exchanges” (Costa 2019a).

In the United States, temporary work visa programs are employer-driven and rely on employer sponsorship (Costa and Martin 2018; Costa 2021). Workers on such visas typically have little power to negotiate for higher wages or better working conditions with their employers (Costa 2019b). These workers also often find it difficult to report abuses because of their dependency on their employer. The temporary work visas that facilitate employment of care workers have been associated with shocking scandals of worker abuse, exploitation, and forced labor (Kopplin 2017; ILRWG et al. 2018; Costa 2019a; Thrupkaew 2021).

In this way, the U.S. is not dissimilar to countries that are known to have particularly onerous immigration sponsorship programs, such as the kafala system found in Gulf Cooperation Council countries.2 In the kafala system, a worker’s immigration status is directly tied to their employer and they cannot seek another employment opportunity without their employer’s permission (Coffey et al. 2020; Addati et al. 2018). This makes domestic workers under such a system incredibly vulnerable and—as in the U.S.—discourages reporting of abuse.

All of this reinforces that a country’s immigration policies are a critical vehicle for securing a “high road” care economy and enforcing labor rights (Addati et al. 2018; Costa 2019b). Employer groups in the United States have prioritized new flows of temporary migrant workers to fill a range of occupations, including care work, and have recently litigated to remove the requirement that employers pay care workers on visas at least the state minimum wage (O’Neal 2021). Keeping immigration policy from being used by employer groups to degrade standards in the care industry is a near-term challenge that is worth highlighting.

Ableism further amplifies the devaluation of care work

Sexism, racism, and xenophobia are integrally tied to the devaluation of care work and of those who predominantly perform it. Ableism adds a further dimension to this devaluation by dehumanizing and devaluing two specific groups of people, namely disabled people and the elderly.

Altiraifi (2019, 3) defines ableism as “structural and interpersonal oppression experienced by people with disabilities or those presumed or determined to be disabled.” Relatedly, there is a social component to disability, in which “disability refers to a socially constructed system that categorizes, values, and ranks bodies and minds as normative or marginal” (Altiraifi 2019, 3). Thus, those who are dependent on care because of disability are not seen or treated as equal members of society and are marginalized based on how much they are viewed to contribute to the productive structure of the economy. Therefore, the labor rendered to provide the support and services they need is necessarily devalued. As a result, there is a close link between care workers and people with disabilities and older adults as subjects of an overlapping marginalization—and, indeed, for some care workers who are themselves disabled, this connection is even more profound (Chang 2017).

Ableist narratives and policies devalue and dehumanize people needing care in ways that are inextricably linked to the racialized systems of oppression that devalue care workers’ labor: The same ideologies that dehumanize and marginalize people with disabilities also exploit immigrant women of color and limit their options to precarious jobs (Chang 2017). Consequently, the fight for better working conditions and pay for care workers is inseparable from also centering and improving conditions for people with disabilities and older adults (Novack and Cokley 2020).

Wage benchmarks for care work

We’ve already established that care workers are undervalued and underpaid in the United States and across the world. Our objective in this section is to provide policymakers with a broad economic framework for thinking about how much care workers should be paid in the U.S. labor market. Using the research literature and microdata, we provide several considerations for setting pay standards for care workers, with specific estimates for home health care and child care workers. In Table 1, we present current wages and propose various benchmarks to reduce pay penalties and improve wages in these jobs. These benchmarks include the following:

• a minimum standard for a living wage for all workers;
• an estimated wage standard that (1) reduces wage penalties currently faced for performing care work; (2) reduces penalties associated with racial and gender discrimination; and (3) adds an estimated union wage premium for care workers;

• a standard for home health care workers based on international standards; and
• a standard for child care workers based on other early educators in the U.S. economy.

We also provide in this section a more detailed discussion for understanding the research basis and assumptions built into our benchmarks.

Table 1

We begin by identifying and defining the workers we are looking at. To ensure sufficient sample sizes for average wages (as for the demographic analysis presented earlier), we pool three years of data from the Bureau of Labor Statistics’ Current Population Survey, from 2018 to 2020 (EPI 2021a). We then identify home health care workers and child care workers by their respective relevant industries and occupations.3 Average wages are $13.81 for home health care workers and $13.51 for child care workers, in 2020 dollars.4 In contrast, the average worker wage economywide is $27.31 per hour.

Note that Table 1 proposes benchmarks for care worker wages only, not for total compensation or working standards. The reality is that, in addition to suffering from low wages, both child care and home health care workers are unlikely to receive nonwage benefits such as employer-sponsored health care coverage, pensions, or paid medical or family leave.

Figure D shows the shares of the workforce who have access to health insurance and pension coverage on the job (Flood et al. 2021). While just over half (52.2%) of all workers have an employer-sponsored health insurance plan that is at least partially paid for by their employer, only one-fifth (20.7%) of child care workers and one-quarter (25.8%) of home health care workers have that benefit.

Workers overall are less likely to have pension coverage (a pension plan or other retirement plan at work) than they are to have health insurance coverage: Just over one-third (35.0%) of the workforce has a workplace retirement plan. But an even smaller share of care workers have pension coverage: 10.2% of child care workers and 12.6% of home health care workers.

Figure D

In addition to setting higher wages for care workers, we must also work to ensure that they receive sufficient nonwage benefits, such as health coverage, a retirement plan, fair scheduling, and paid leave. Many child care and home health care workers, because they make such low wages and receive little to no additional employer support in terms of benefits, are forced to juggle multiple jobs and patch the gaps with public benefits programs such as Medicaid, housing assistance, energy assistance, Supplemental Nutrition Assistance (SNAP), Special Supplemental Nutrition for Women, Infants, and Children (WIC), or cash assistance/TANF (Cooper 2016).

Economywide wage standards

The first set of benchmarks we propose for care worker pay is based on the goal of improving economywide wage standards.

Raising the minimum wage

A starting place for all workers should be no less than $15 an hour. A minimum wage of $15 would finally increase the real purchasing power of low-wage workers above the minimum of 50 years ago (Cooper, Mokhiber, and Zipperer 2021).

Raising the minimum wage to $15 per hour would benefit over 19 million essential and front-line workers, raise wages for one in three Black workers and one in four Hispanic workers, and help lift millions out of poverty (Cooper, Mokhiber, and Zipperer 2021). Furthermore, more than half a million child care workers and nearly 2 million home health care workers would benefit from a $15 minimum wage (Wolfe and Zipperer 2021a; Wolfe and Zipperer 2021b).

Determining a living wage floor

While setting a higher economywide minimum wage is an important and necessary first step, it is not the final goal. A full-time, full-year worker making $15 an hour cannot support a family at a decent standard of living anywhere in this country. To better assess the true cost of living, EPI’s Family Budget Calculator estimates area-specific incomes needed to cover basic expenses like housing, food, transportation, health care, taxes, and other necessities (Gould, Mokhiber, and Bryant 2018; EPI 2018). The Brownsville/Harlingen metro area in Texas is the lowest-cost metro area to live in, according to EPI’s Family Budget Calculator (EPI 2018), but even in this lowest-cost metro area, a worker trying to make ends meet for themselves and one young child on just their own wages would have to earn a full-time hourly wage of at least $21.11 (EPI 2018).5 A worker living in any other metro area in the country would of course need an even higher wage—a far higher wage in some areas—to attain a decent standard of living.

Even apart from the basic moral obligation to pay a living wage for a day’s work, there are good reasons that care workers should be paid substantially more than $15 for the work they do. Care workers do vital and demanding work. This work should be assigned a monetary compensation value that is more commensurate with its value to society. Care workers should be also compensated at a level appropriate to the demands of the work. Finally, in order to meet growing needs—and not leave large shares of the population stranded without needed care—we will ultimately have to pay wages and benefits at a level that will attract sufficient numbers of workers to meet the demand.6

Reducing pay disparities

As discussed above, pay inequities experienced by care workers have multiple root causes. Care work itself has been historically undervalued. Given that care workers are predominantly women, and disproportionately people of color and immigrants, they are also impacted by historical and current sexism, racism, and xenophobia and associated gender and racial/ethnic wage gaps. Further, care workers, like millions of other workers in our economy, have faced lower wages because of their lack of bargaining power in the labor market. In our second set of benchmarks, we examine the penalties these workers face for the work they do and for who they are, and we present an alternative pay proposal that reduces these barriers to higher pay.

Measuring the care penalty

A wide body of economic research has identified and measured a care penalty—that is, the lower pay received by care workers after controlling for characteristics of care jobs, skills required, or qualifications.

One of the foundational studies in care penalty research found that care workers faced a 5–6% penalty compared with similar workers in other fields (England, Budig, and Folbre 2002). While this study makes a significant contribution to the field, there is good reason to believe that these 2002 estimates understate the penalty faced by care workers both then and today.7

The latest research from Budig, Hodges, and England (2019) on this topic finds a significantly larger care penalty than the 2002 study. In the 2019 study, the authors usefully separate out the various care occupations to isolate the differential effect of those that require specific credentials—an educational degree, coursework, and/or special certification/licensing—from those that do not require such credentials.8 The authors identify child care workers, nursing aides, and health aides among the low-education/high-licensing fields and find a 15% pay penalty among women and a 6% penalty among men in these fields.

A more recent study from the Economic Policy Institute—which controls for key demographic characteristics including gender, race/ethnicity, age, education, and census division—finds that home health care workers experience a wage gap of 27–36% relative to similar workers who are not in care jobs (Wolfe et al. 2020).

While the penalties vary widely across these studies, the common thread is that care workers face a penalty for choosing care work. After reviewing these and the broader care penalty literature,9 we ultimately chose to rely on Budig, Hodges, and England’s 2019 findings—which are in the middle of the range of estimates, and which are based on methodology that attempts to tease out a causal effect—to build our benchmark for a wage that reduces the care penalty.

Reducing care penalties

To build our next set of benchmarks, we first apply the care penalties found in Budig, Hodges, and England’s 2019 analysis. To that end, we reverse out their 15% pay penalty for women and the 6% pay penalty for men in each care sector. Because of the hugely disproportionate number of women in both care sectors (as shown in Figure A), this equates to an overall pay penalty of about 14%. Starting with current care worker wages and then reducing care penalties by 14%, we find a benchmark for care wages to be $15.74 and $15.47 for home health care workers and child care workers, respectively.

Reducing demographic penalties

However, the penalty care workers face in the labor market is not limited to the fact that care work is largely undervalued and underpaid. The care pay penalty also exists because the population who does the work is undervalued. To better understand and address this dynamic, we must look more closely at who care workers are and the historical and social discriminations they have faced and still face today.

By the mere fact of their demographic characteristics, namely their gender, race, ethnicity, and citizenship status, many care workers have faced historical and current barriers to employment and equal pay. These demographic penalties reduce the outside options care workers have in the labor market, thus reducing their bargaining power or leverage to receive higher pay in their respective care-working professions. The additional penalty these workers face in the labor market at large needs to be taken into account when determining just how much care workers need to be paid to mitigate these effects.

To measure those demographic penalties, we use a multivariate regression model to tease out a reasonable estimate of the penalties workers face in the labor market based on their gender, race/ethnicity, and citizenship status, controlling for typical human capital measures like education and experience, which tend to impact wages.10 Then, we apply those demographic penalties to the shares of the workforce represented by each of those groups.11 Because these workers’ outside options are limited due to historical and current labor market discrimination, a fair wage must address all of these penalties. Reducing these measured demographic penalties, on top of the care penalty reductions we calculated above, yields a new benchmark wage of $20.20 for home health care workers and $19.87 for child care workers.

Adding a union premium

Reducing the care penalty and the demographic penalties are two necessary steps to improving care worker pay. Another important step is to harness the bargaining power that results from increased unionization to boost wages and working conditions in these industries. While a strong public sector plays a crucial role in both funding and labor enforcement, unions are another critical intermediary in negotiating and bargaining for higher pay and benefits.

A recent New York Times article, featuring the stories of two home health care workers in two different states, finds that home health care workers can face very different working situations depending on the presence of unions in their state: Home health care workers in states with high levels of union membership have higher wages and are more likely to have paid time off, medical and dental insurance, retirement benefits, and more, while home health care workers in states with low levels of unionization have lower wages and few to no benefits (Schulte and Robertson 2021).

The union premium is the additional pay unionized workers—workers who are either union members or covered under a union contract—receive relative to the pay of nonunionized workers. We estimate the union premium in a regression framework controlling for other individual and job characteristics, such as the worker’s education and employment sector. On average, workers covered by a union are paid 10.2% more in hourly wages than their nonunionized counterparts (EPI 2021b). Our analysis also shows that, in addition to having higher wages, unionized workers are more likely to have better benefits such as paid leave and health care, both of which are particularly crucial during a global pandemic (Gould 2020).

If care workers had leverage over their pay similar to that found from being in a union, care workers could reap a similar increase in pay (McNicholas et al. 2020). Applying this premium to care workers’ wages, on top of the care work penalty and demographic penalty reductions estimated above, wages for home health care and child care workers would be $22.26 and $21.90, respectively.

Adopting international standards for home health care workers

Around the world, care work is incredibly gendered and mostly performed by women who face additional forms of systemic oppression across identities such as ethnicity or race, class, and immigration status (Coffey et al. 2020). Despite the fact that the undervaluation of care work and the resulting difficulties in securing a stable care workforce are global phenomena, the situation for U.S. workers is particularly dismal when compared with peer countries.

The involvement of the state in both funding care provision and overseeing its workforce is the through line among nations with better-functioning care sectors. In a detailed examination of care work and its workforce, the International Labour Organization (ILO) concludes that “public provision of care services tends to improve the working conditions and pay of care workers and unregulated private provision to worsen them, regardless of the income level of the country” (Addati et al. 2018, 166). The ILO identifies Denmark, Finland, Norway, the Netherlands, and Sweden as a cluster of nations with very high levels of employment in the care sector. These nations have a number of things in common that inform their stronger care workforces. Among them is a universal right to access care services.

Applying the EU average wage for home health care workers

These conditions translate to significant benefits for care workers. Finland, for example, has one of the highest median hourly wages among OECD countries for care workers in the long-term-care sector (OECD 2020, Fig. 1.6). Another useful earnings statistic is the average hourly wage in various care sectors as a share of the national average hourly wage across the economy. Across the current 27 European Union (EU) member states, nonresidential (i.e., caring for a client in their home rather than in a residential care facility) long-term-care workers are paid 80% of the average national hourly wage. Extrapolating to the U.S. context using average hourly wages in the U.S. labor market, home health care workers would be paid $21.85 per hour using this benchmark.

Applying the top European wages for home health care workers

Among 29 countries analyzed—the 27 EU member states, plus Norway and the United Kingdom—the Netherlands and Norway were tied for the highest wage ratio (relative to the average national wage) for social services workers in the nonresidential long-term-care sector (i.e., the home health care sector), at 95% (Dubois 2021). Applying this 95% ratio to the U.S. context, we arrive at a benchmark of $25.95 for home health care wages.

Adopting child care wage standards based on other teaching professions

Early child care and education workers must have many of the same skill sets and expertise as elementary and middle school teachers. These care workers have a vital influence on children’s cognitive, social, and emotional development (Penn State 2011). While they are sometimes seen as akin to babysitters, these early educators in fact perform a role similar to that of other teachers of young school-age children. Therefore, they should be paid as much as similarly educated teachers of elementary and middle school teachers (McLean et al. 2021).

Applying education-adjusted elementary/middle school teacher salaries to child care workers

We begin creating this benchmark by estimating average weekly earnings for elementary and middle school teachers by educational attainment (EPI 2021a).12 We apply these earnings to child care workers based on their own level of educational attainment and on the share of child care workers with each level of education in five categories: less than high school, high school, some college, college, and advanced degree.13 We then return to a measure of hourly wages and find that a more fair wage standard, using this benchmark, would pay the average early child care and education worker $21.22 an hour.14

Reducing the teacher penalty

Unfortunately, elementary and middle school teachers themselves face substantial wage penalties in the labor market compared with similarly credentialed workers in the economy overall (Allegretto and Mishel 2020). Setting child care wages modeled only on teacher wages perpetuates the pay disparities teachers face and embeds those disparities into the child care pay standard. Therefore, we attempt to remove this pay penalty when setting our final wage standard for child care workers by reversing out the teacher pay penalty of 19.2% to the education-adjusted elementary and middle school pay standard (Allegretto and Mishel 2020). Removing the teaching penalty yields a reasonable wage standard of $25.30 for child care workers.

Benefits of paying workers more for care provision and quality

Care workers are severely underpaid, and, as outlined above, they face multiple pay penalties. Paying care workers more is not only possible and long overdue, but it would result in far-ranging positive consequences for those they care for and the macroeconomy. Along with providing much-needed financial stability and economic security to care workers themselves, higher wages in the care sector would produce a range of positive benefits to people with disabilities, older adults, and children; employers and institutions; and the economy as a whole.

To put it simply, raising wage standards for care workers makes good economic sense. The existing low-wage care system is highly precarious and inefficient, not to mention extremely harmful to care workers themselves. The persistent low wages and lack of benefits mean that many care workers cannot afford to support themselves or their families, and many leave or change jobs as a result. This high turnover, in turn, damages the quality of care provided and imposes costs on employers (Ruffini 2020; Caven et al. 2021; Batt, Lee, and Lakhani 2014). And the churn in general hurts the macroeconomy.

Providing much-needed financial stability and economic security to care workers

The inefficiency and dysfunction of the care economy imposes steep costs—not the least of which is the cost to care workers in lost and low wages. Higher wages would transform the lives of the care workers who are the foundation of the current system. Both child care workers and home health care workers carry out deeply specialized and often physically and emotionally demanding labor for poverty-level wages and without fringe benefits or paths for advancement. These care workers are deeply committed to the people in their care and recognize the risk their absence would pose to the well-being of people with disabilities, older adults, and children. And yet the devaluation of care work—combined with the sexism, racism, and xenophobia many of these workers endure—make it less likely that care workers will be treated with the respect they deserve. In addition, given the isolating nature of the job and physical distance from co-workers, it is harder for care workers to build solidarity, strike, or use other traditional levers of worker power to increase their pay or labor standards.

Long hours and low wages mean that, in reality, millions of care workers cannot afford to cover their family’s basic needs, especially as costs and rents have skyrocketed (Gupta 2021; Gould 2015; Mazzara 2019). Out of financial and economic necessity, many are forced to leave the care sector for other industries, which may compensate them more equitably for their experience and labor. Increasing wages in the care sector would finally compensate and value care workers’ labor closer to the level it deserves, and it would provide much-needed economic security to these workers. Higher wages would allow more care workers to continue working in these demanding and critical jobs.

Strengthening the provision and quality of care

In addition to the costs to care workers, there are costs to those receiving care under the current system. The provision and quality of care would undoubtedly be strengthened with higher wages across the care sector and the resulting lower turnover. People with disabilities, older adults, and children who are entrusted to care workers for significant periods of time would thus strongly gain from the better pay. In addition, accessible care also provides parents or other family members, especially women, a means to work or reenter the workforce.

Broadly, the economic stability from a good-paying care job and the absence of financial distress translates into a more secure and less stressed workforce. In the case of child care, research has shown that stability in who is giving care, and interactions with experienced caregivers, are beneficial for babies’ and toddlers’ learning and growth in the crucial early years of development (Ludden 2016). Other research has found that high-quality early care has long-lasting effects (Abbott 2021).

In home health care, higher pay and reduced turnover would allow people with disabilities and older adults to build strong and trusting relationships with their caregivers. A recent economic study of the long-term residential care sector found that a 10% increase in the minimum wage resulted in higher earnings among workers in this sector, which translated into significant improvements in patient health and safety (Ruffini 2020).

Reducing costs associated with employee turnover

Higher wages and lower turnover are also beneficial to employers and third-party payers (Weller et al. 2020). Employers and institutions heavily bear the costs of turnover through spending on recruitment and training for new employees (Boushey and Glynn 2012). The cost savings from reduced turnover alone is estimated to be up to 40% of a position’s annual wage (Bahn and Cumming 2020).

A stable workforce and employees who want and are able to stay in their jobs creates stability for employers as well, which has powerful reputational and income effects (Washington State Department of Commerce 2019). Child care centers, for instance, operate on extremely thin margins and have high overhead costs, such as rent, safety regulations, mandated child-caregiver ratios, food, etc. (Workman and Jessen-Howard 2020; Oncken 2016). Saving on turnover would help centers meet these costs more easily, and higher pay might attract more applicants to open positions. It is important to note, though, that the cost savings from lower turnover—while helpful—is not sufficient to solve our child care challenges. Federal funding and public investment remain essential counterparts to helping employers meet costs and pay equitable wages.

Macroeconomic benefits

And finally, higher wages for care workers would have numerous macroeconomic benefits. A recent study of the nursing long-term-care industry found that raised wages prevented thousands of deaths, lowered the number of inspection violations, and reduced the cost of preventable care (Ruffini 2020). Estimations and simulations of large investments in care infrastructure have been shown to create millions of jobs (Palladino 2021). In addition, a better-paid care workforce can provide macroeconomic stimulus as workers spend more money on goods and services in the economy (Palladino and Lala 2021).

Estimates of the macroeconomic impact from investing in early child care and education vary, but they have overwhelmingly been shown to have a positive return. Heckman and others analyzed the Perry Preschool Program and found annual social rates of return between 7% and 10% (Heckman et al. 2010). A recent analysis of California ECE programs found that each dollar invested generated as much as $1.88 in increased economic activity, along with a range of other macroeconomic benefits such as increased labor force participation of women, increased parental earnings, and increased worker productivity (Powell, Thom et al. 2019). Karoly (2016) analyzed access to preschool and estimated a multiplier effect of $3–4. Abbott (2021) found that investing one dollar in high-quality pre-K would generate an additional $8.60 in economic benefits (Abbott 2021). A large part of these economic benefits takes the form of increased earnings for children later in life (CEA 2014). And finally, a recent study that followed up with participants of ECE programs later in life found that the benefits for both the original participants and their children were substantial (García et al. 2021).

In a prime example of the success of paying more, when hazard pay was raised (with benefits) during the pandemic, it was found to reduce economic hardship and improve retention (SEIU 775 and CAP 2021). These benefits should be extended, so that care work can have the protection and dignity needed to be desirable careers. The public role in both funding and in ensuring and enforcing these wage standards is key in making sure that funding is actually channeled into higher wages (Tung and Connolly 2015).

Conclusion

The pandemic recession shone a bright light on just how broken our care economy was and how much care workers were struggling. Our economic system, left to its own devices, has failed to recognize the worth of care work and maintain a well-functioning market (Jones 2020).

Care work is valuable (Coffey et al. 2020), demanding (Leberstein, Tung, and Connolly 2015), and requires specialized skills, given that workers are routinely making highly consequential decisions about and with people with disabilities, older adults, and children (NDWA 2019). Securing living wages, dignity of work, and safe working conditions for care workers is necessary for our collective survival. Better pay and work standards unambiguously improve the lives of workers themselves, but also strengthen the provision of care, secure a stable workforce, and reduce turnover (Weller et al. 2020; Ruffini 2020). These systemic improvements are essential given that demographic shifts will increase the need for care work in coming years.

Such an investment is also exactly what is needed as the economy recovers from the pandemic recession. When wages and conditions are better for care workers, care workers and their families are better off, employers and institutions are better off, and parents and others looking for caregiving for their families are better off. The macroeconomy benefits in turn as spending and productivity are boosted (Antonopoulos et al. 2010; Palladino and Lala 2021).

But improving conditions for care workers and ensuring access to quality care is not just about “return on investment” and protecting our interests; it is also a moral imperative to rectify long-standing systemic injustices. To address the wage suppression of care workers, we must first recognize that this suppression lies at the intersection of gender, racial justice, disability, and immigrant rights concerns (Chang 2017). The provision of care and the needs of people with disabilities, older adults, and children are not simply externalities to having a well-functioning and rewarded care economy. Rather, the intersectional concerns of those who are giving and receiving care should be at the very center of our discussions and policy choices.

By making deliberate policy choices to rectify historical and current harms—and grounding those policies in the experiences of the most marginalized of these workers (NDWA 2020), we ensure a shared prosperity for all (Bozarth, Western, and Jones 2020).

Notes

1. “Reproductive labor” refers to the labor that is necessary to sustain and nurture humans, both day to day and across generations. Per Glenn (1992), “Reproductive labor includes activities such as purchasing household goods, preparing and serving food, laundering and repairing clothing, maintaining furnishings and appliances, socializing children, providing care and emotional support for adults, and maintaining kin and community ties.”

2. United Arab Emirates, Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain.

3. Because of changes to industry and occupation categories in 2020, we combined newly disaggregated codes in the latter year with their aggregated counterparts in the former years. Although these codes differed, the following list is for the more detailed codes found in the 2020 data: Home health care workers are identified in the CPS by the occupations Nursing, psychiatric, and home health aides; Personal and home care aides; Home health aides; Personal care aides; Nursing assistants; Orderlies; and Psychiatric aides; and by the industries Private households, Home health care services, and Individual and family services. Child care workers are defined by the Child care worker occupation.

4. While the prior demographic analysis and results rely on the sample from the monthly CPS, wage analysis requires use of the Current Population Survey Outgoing Rotation Group (CPS-ORG), again pooled from 2018 to 2020 and defined here as the “current” wage in 2020 dollars.

5. In San Francisco, California, it would take a full-time, full-year wage of about $54 dollars per hour for this family to make ends meet. We need a minimum federal standard to set a floor for care worker pay, but state and local governments should be allowed—and encouraged—to legislate higher minimums. EPI’s most recent family budget calculator figures have been updated to 2020 dollars for meaningful comparison.

6. Another reason for the public sector to step up is so that care is not only affordable but there is also less incentive for exploitative or illegal markets to meet the demand for care work (Reilly and Luscombe 2019).

7. England, Budig, and Folbre use a fixed-effects model based on job-switchers. It is possible that their reliance on job-switchers for identification may not provide reliable estimates for long-time workers within the care field. Use of the National Longitudinal Survey of Youth (NLSY) up to data year 1993 also means that their sample does not allow measurement of the penalty among older workers nor does it fully account for the demographic characteristics of workers in caring fields in the economy today.

8. The authors use a fixed-effects model on the most recent data with later years of the NLSY. They identify the care penalty from occupational switchers and find a care premium in occupations such as doctors and other high-education/high-licensing fields. They also find that low pay of care workers cannot be explained by human capital differences and that care workers do not enjoy increasing pay with more experience as workers in other sectors do.

9. Others studies include Folbre and Smith 2017, which examines the pay penalties in the care sector for high-contact workers versus managers; Howes, Leana, and Smith 2012, which compares credentialed nurses with often-less-trained home health care workers; and Findlay, Findlay, and Stewart 2009, which focuses on the evaluation of caring skills themselves and gender differences in pay in the industry. Findlay, Findlay, and Stewart find that the skills are underestimated, notably because the gendered construction of caring skills contaminates their proper evaluation. Using longitudinal pairs combining CPS-ORG and O*NET data, Hirsch and Manzella (2015) find a larger care penalty for men than women. Similar to the other fixed-effects models, their identification strategy relies on job switchers and looks at the extent of caring across many caring professions, but their inclusion of skills and requirements imputed from the O*NET attempts to provide more similar comparables.

10. Specifically, we construct a log wage regression using a fully interacted model with gender and race/ethnicity and citizenship status controls. In additional to the demographic coefficients of interest, we control for age, age squared, educational attainment, and geographic division. These variables typically measure human capital returns to experience (loosely represented by age and age squared), skills (roughly characterized by formal educational attainment in five categories), and differences in the cost of living (measured using nine geographic divisions across the country).

11. The statistically significant coefficients on each gender-race/ethnicity-citizenship status interaction term are then applied proportionately to the shares of each demographic group found in the relevant care occupation. For example, the coefficient on the demographic interaction for Black women born in the U.S. yields a pay penalty of 34.3% compared with white U.S.-born men in the labor market at large. This pay penalty is weighted by 0.187 and 0.117, respectively, representing the shares of home health care workers and child care workers who are Black U.S.-born women. The weighted sum using the shares of each demographic group in each caring profession creates a total demographic pay penalty.

12. We estimate weekly as opposed to hourly wages here because of the difficulty of measuring teacher work hours within a week as well as over the year (Allegretto and Mishel 2020).

13. For child care workers with a college or advanced degree, we apply elementary and middle school wages according to their shares in the child care profession. For child care workers with educational attainment lower than a college degree, we apply the overall weekly earnings ratio of that level of educational attainment to the one required.

14. The final step involves applying the actual ratio of weekly to hourly earnings of child care workers to the imputed weekly value to back out a better standard for hourly child care wages.

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• Measures no coherent economic value. The measure of debt it targets is not inflation-adjusted, would perversely make the debt situation look worse if there was a reform to Social Security that closed that program’s long-run actuarial imbalance, and ignores trillions of dollars in assets held by the federal government.
• Has no relationship to any economic stressor facing the country. Over the past 25 years, as the nominal federal debt rose from $5 trillion to $22.7 trillion, debt service payments (required interest payments on debt) shrank almost in half, from 3.0% of GDP to 1.8%.
• Can cause real damage if it’s not lifted in the next couple of weeks. It would only take a couple of months of missing federal payments due to the debt ceiling to mechanically send the economy into recession—and that’s without assessing damage it would cause from financial market fallouts.
• Has been used time and time again to enforce misguided austerity policies. The 2011 Budget Control Act (BCA) grew directly out of a GOP Congress threatening to not raise the debt ceiling absent spending cuts. The BCA provided an anti-stimulus about twice as large as the stimulus provided by the American Recovery and Reinvestment Act (ARRA—commonly known as “The Recovery Act”) and is largely responsible for the sluggish recovery from the Great Recession.

Given all of this, the debt ceiling should be abolished or neutralized in absolutely any way politically possible. It serves no good economic purpose and plenty of malign ones. Below we expand on these points.

Overview of the debt ceiling

The U.S. Treasury draws on banking accounts at the Federal Reserve to fund federal governmental activities—remitting paychecks to federal government employees, sending Social Security checks, reimbursing doctors for treating Medicare-covered patients, paying defense contractors and interest to bondholders, and so on. These accounts are fed on an ongoing basis by both tax revenues and the proceeds from selling bonds (debt). But, because the United States has a statutorily imposed limit of how much outstanding debt is allowed, once this limit is reached on issuing new debt, Treasury can no longer sell bonds and deposit these proceeds, and hence accounts at the Federal Reserve will dwindle as they are now only fed by ongoing taxes, which are insufficient to cover all spending. This limit is being rapidly reached, and by mid-October (current guesstimate) the Treasury accounts will be too small to finance that day’s governmental activities.

The debt ceiling measures no coherent economic indicator

The statutory debt ceiling is a completely arbitrary value—there has never been any economic justification for any of its historical values and it is raised (or suspended periodically) purely based on congressional whim. It is not indexed for inflation, even as federal government payments (like Social Security checks) are so indexed.

Further, it measures gross debt, which includes debt the federal government owes itself. The biggest difference between the debt held by public and gross debt is the Social Security Trust Fund (SSTF). To help pre-fund the now-arrived retirement of the Baby Boomer generation, for years the Social Security system taxed current workers more than what was needed to pay current beneficiaries. The surplus was credited to the SSTF. As dedicated Social Security revenues fall a bit short of benefits in coming decades, the system (as designed) will draw down the SSTF.

But this means that in those years that saw the SSTF rise, this actually inflated measures of gross debt. And it means, for example, that proposals to narrow the long-run actuarial shortfall of the Social Security system would actually see us hit the federal debt limit sooner. How can that make sense?

Finally, the gross debt also excludes the roughly $2 trillion in financial assets (mostly student loans) held by the federal government. Any measure that aims to measure the balance sheet health of an entity probably shouldn’t ignore trillions of dollars in assets.

The debt ceiling has no relationship to genuine economic stressors

Higher interest payments that put stress on the federal government’s ability to pay and raise the cost of capital for private businesses is the entire economic reason to keep an eye on public debt. But interest rates have collapsed as debt has risen. In 1996, gross federal debt stood at $5.2 trillion. By 2019, it was at $22.7 trillion. Yet in 1996, debt service payments—the interest costs needed to be paid on outstanding debt—were 3.0% of GDP, but by 2019 they were just 1.8%. The reason why interest rates have collapsed while debt has grown is simply that both variables have been driven by pronounced economic weakness over most of the post-2000 period. But the larger point is that the level of gross federal debt has no reliable relationship to any economic stressor faced by governments or households, so hinging something as high stakes as a hard limit on the federal governments’ legal ability to borrow on this measure makes no sense.

The debt ceiling will cause a recession if it’s allowed to bind spending in coming months

Currently, the Congressional Budget Office (CBO) forecasts a budget deficit of just under 12% of GDP for 2021. The Bureau of Economic Analysis (BEA) indicates much of this was front-loaded—federal government borrowing averaged 16% of GDP for the first six months of the year. For the rest of the year, assume borrowing averaged about 8% of GDP. This is the gap between tax revenues and spending, so if no more borrowing is allowed due to the debt ceiling, it is de facto a measure of how much spending would have to be cut. A spending cut of 8% of GDP is a mammoth shock, and to have it slam into the economy in an instant would be spectacularly damaging.

For comparison, the much-touted private-sector “deleveraging” (an abrupt swing from borrowing to saving) that led to the Great Recession in 2008–2009 was about a 9% contraction in spending as a share of GDP—but that was spread over more than two years. This means that the mechanical shutdown of spending caused by hitting the debt ceiling would be sharper and larger than the one that led to the Great Recession. Worse, as the negative fiscal shock ripples through the private economy, the austerity becomes self-reinforcing. Say that in the first month, the 8% of GDP cutback in federal spending has a multiplier of 1.5, so economic activity in that month is slowed by 12% of that month’s GDP in total. (While it’s true that multiplier effects may well not happen right away, illustratively this is the dynamic we’re facing.)

With GDP and incomes 12% lower, tax collections will fall by roughly 4% of GDP. So the next month, not only will the original cutback in spending be needed, but the new and lower tax collections will ratchet down spending even more—and pretty quickly! Normally the federal budget acts as an automatic stabilizer when recessions hit—taxes fall and spending rises and debt increases, all of which spurs economic activity. But a recession caused by an arbitrary legal rule that spending cannot exceed (falling) taxes means that the budget would actually act as an automatic destabilizer.

If the spending cutbacks occur for a month, say, and then federal transfers make up for the lost month, then lots of the damage could be undone pretty quickly. But not all of it. The multiplier effects—the consumption foregone because, say, the workers at diners serving the retirees who didn’t go out to eat for a month because their Social Security checks didn’t come—will not be made up by subsequent government payments.

Finally, all of this is just a description of the strictly “mechanical” effects of hitting the debt ceiling. The ripple effects stemming from distress in financial markets that would be sparked by missing interest payments on Treasury bonds and bills could be extreme as well. But these mechanical effects are useful to keep in mind when some misleadingly claim that the Treasury can “prioritize” payments to bondholders and hence the U.S. can avoid technical “default.” Besides being likely impossible for both logistical and legal reasons, prioritizing interest payments to bondholders just means defaulting even more heavily on Social Security beneficiaries, doctors’ reimbursements for seeing Medicare and Medicaid patients, federal contractors’ bills, and all other federal payments. And “prioritizing” some payments over others doesn’t change the grim mechanical arithmetic run through above.

The debt ceiling is an austerity trump card

People often invoke the damage done by the 2011 showdown over the debt ceiling. They point to stock market losses, increases in “economic uncertainty” indices, and estimates of how much higher interest rates went in the showdown’s aftermath. But they tend to miss what was by far the greatest damage done by the 2011 debt ceiling episode: the passage of the Budget Control Act (BCA), a piece of legislation that is relatively unknown to the lay public, but that delivered an anti-stimulus to the U.S. economy about two times as powerful as the stimulus provided by the Obama administration’s Recovery Act in 2009.

The BCA’s caps on federal spending explain a large part of why this spending in the aftermath of the Great Recession was the slowest in history following any recession (or at least since the Great Depression). This federal spending austerity fully explains why the recovery from the Great Recession was so agonizingly slow. If this spending had instead followed the normal post-recession path, then a return to pre-recession unemployment rates would’ve happened 5–6 years before it finally did in 2017.

The BCA was the GOP demand for raising the debt limit in 2011, and the Obama administration acquiesced to it. The leverage provided by the debt limit led directly to the worst recovery following a recession since World War II. If the debt ceiling manages to fatally wound prospects for the budget reconciliation bill wending its way through Congress now, we’ll see history repeat itself, with fiscal policy turning sharply contractionary in mid-2022 as the boost from the American Rescue Plan (passed earlier this year) begins quickly running out. This leverage the debt ceiling provides to those looking to enforce austerity is its greatest—and often most-overlooked—danger.

The debt ceiling needs to be abolished—either formally or effectively

Given all of this, it is obvious that the U.S. should join the vast majority of rich countries around the world who don’t have a debt ceiling. It would be most straightforward if Congress would abolish it straightaway. Alternatively, if a large enough group of members of Congress demand that the reconciliation bill raise the debt ceiling to some laughably large number ($100 trillion? $500 trillion?), this would effectively abolish it (for arcane procedural reasons I don’t understand, under the rules of budget reconciliation the only change that can be made to the debt ceiling is to raise it).

If Congress won’t act sensibly, the Biden administration should act unilaterally. There is plenty of support for citing the fact that Congress has given the executive branch conflicting instructions and, hence, the administration is free to choose which path it follows. Congress’s taxing and spending instructions require the administration to issue debt to cover the shortfall, yet the debt ceiling would bar debt issuance. One of these congressional “decisions” must be ignored, so the administration should decide. A more fun solution—one that highlights the stupidity of the debt ceiling—is minting the trillion-dollar platinum coin. I’m a fan, mostly because of the educational value of it, and because it treats the debt ceiling as a problem with the contempt it deserves.

However it is done, it is imperative to not just squeak through this latest crisis. Either Congress or the Biden administration needs to do future policymakers a huge favor and render the debt ceiling moot forevermore. It has already done enough damage.

Although the gold-standard data sources tracking changes in health insurance coverage will not be available until next year, imperfect but available data on job churn and net employment allow us to produce estimates of losses of health insurance coverage since the COVID-19 shock began. These estimates are more accurate than early-crisis estimates, and they account for job gains.

Following are key highlights from the report.

• In any given month, churn in the labor market—some people losing jobs while other people gain them—means millions of workers newly gain or lose access to employer-sponsored health insurance (ESI) each month. For example, between 2015 and 2019, roughly 2.8 million workers gained access to ESI in each month while 2.7 million workers lost access, leading to a net increase in ESI coverage of just over 100,000 workers each month.
• Extreme churn after February 2020 has led to very large losses in ESI coverage. In March and April, for example, new hiring led to 2.4 million workers gaining ESI coverage each month, but historically large layoffs led to 5.6 million workers losing coverage each month. This rate of lost coverage—over 3 million workers—dwarfs a similar calculation for the number of workers losing coverage each month during the biggest job-losing period of the Great Recession (September 2008–March 2009).
• While the data documenting labor market churn data are useful, they do not provide the best estimates of ESI losses because they are not the most timely data, nor do they provide the best net measure of employment changes.
  • Since the onset of the COVID-19 shock to the economy, roughly 6.2 million workers have lost access to health insurance that they previously got through their employer, according to the best measure of net employment change. Our analysis using the monthly, high-quality measure of the total number of jobs in the economy from the Current Employment Statistics (CES) program of the Bureau of Labor Statistics (BLS) is consistent with 9 million workers having lost access to ESI in March and April 2020 but 2.9 million workers having gained coverage between April and July 2020.
• Not every worker who loses ESI loses health insurance coverage. Public health insurance rolls are expanding to absorb the enormous ESI coverage losses of recent months. However, they have not expanded enough to absorb everybody who lost job-based coverage. A new government survey measuring the economic consequences of the COVID-19 shock in real time indicates that for every 100 workers who were covered by ESI before losing their job, about 85 retained access to some form of health insurance in the week after they lost their job.
  • It is likely the case that Medicaid is the dominant alternative source of coverage when people have lost ESI in the COVID-19 shock, as Medicaid rolls have likely expanded by more than 4 million since the COVID-19 shock began.

Though we don’t yet know precisely how damaging the COVID-19 shock has been to health insurance access, the shock has laid bare the huge uncertainty that employer-linked health insurance introduces into U.S. families’ lives. Even in normal times millions of U.S. households must manage coverage transitions in a given month. During economic crises, these coverage changes increasingly include transitioning into uninsured status, which puts families’ health and financial security at risk.

Job market churn and the accompanying lapses in ESI provide one more argument for introducing a much larger role for public insurance in the U.S. health insurance system. (Past EPI reports have documented the health and financial benefits to U.S. households of moving away from our current system; see Bivens 2018, 2020.) An expanded public role could greatly reduce noncoverage and destabilizing insurance transitions and help restrain the rapid growth in health care costs (Bivens 2018). Expanded public insurance would also help the labor market function more efficiently during normal times (Bivens 2020).

In the very near term, policymakers at a minimum should make all testing and treatment for COVID-19 free of charge. In the longer term, U.S. families should be offered a much more robust public option for insurance coverage, with a goal of having this public option become the insurer of first resort for most. A bridge from the near term to the long term could be provided by significantly expanding the eligibility criteria for Medicaid during the current crisis.

Background and data on health insurance coverage during the COVID-19 crisis

Very early in the economic crisis caused by the coronavirus, we drew on the best real-time data then available to estimate how many workers likely had lost access to ESI because they were laid off.1 For a number of weeks we updated our estimates using the weekly initial claims for unemployment insurance (UI), broken down by industry, to make this calculation. Months later in the crisis, there are much better measures of job loss—both gross and net—available to us than these initial UI claims, and so we are updating our methodology.

The gold-standard data source that will allow us to precisely estimate how many people have lost ESI (or any coverage) due to the COVID-19 crisis is more than a year away from being released. Generally, researchers consider the data set released every September from the Annual Social and Economic (ASEC) supplement to the Current Population Survey (CPS) to be the gold standard for health insurance coverage trends. The ASEC asks households about their income and health insurance coverage over the previous year, so the 2020 data will not be available until September 2021. However, as described below, there are a number of available data sources that allow us to make decent (albeit quite imprecise) inferences about the likely loss of ESI and the likely loss of health insurance coverage of any kind due to the COVID-19 crisis.

Using job openings data to highlight insurance churn in normal times and during the crisis

The first data set we look at comes from the Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics (BLS). By tracking total new hires and total separations in relatively recent months by industry, this data set lets us look at likely gross ESI losses and gross ESI gains, highlighting the effect of labor market churn on insurance coverage. (We say “relatively recent months” because the BLS releases the data for a given month not in the following month, but early in the month after that.) The industries we track in this data set constitute the large majority of total employment.

We combine this JOLTS data by industry with industry-level ESI coverage estimates from the most recent CPS-ASEC (2018 data released in 2019) to adjust the JOLTS numbers to account for the fact that not all jobs gained or lost come with health insurance, and that this share varies widely by industry. The full set of results by industry is available in Appendix Table 1. Figure A here shows the likely gross monthly gains and monthly losses in ESI coverage for four periods: the months spanning the end of 2008 and early 2009 that saw the most rapid job losses of the Great Recession (September 2008 through March 2009); the steadily improving labor market of 2015–2019; the period of historically rapid job losses in March and April 2020; and the rapid jobs bounceback in May and June 2020.

Figure A

Figure A shows that in the five years spanning 2015 to 2019, gross employment gains each month were consistent with roughly 2.8 million workers gaining access to ESI each month, while gross employment losses were consistent with roughly 2.7 million workers losing access to ESI each month. The net of this churn was a steady, small increase of about 100,000 workers each month gaining ESI.

In March and April of 2020, gross employment changes were consistent with 2.4 million workers gaining access to ESI each month but 5.6 million workers losing access to ESI, for a net monthly reduction of about 3.2 million workers with access to ESI. This pace of ESI loss dwarfed even that which likely occurred in the worst months of job loss during the Great Recession, when net losses averaged 350,000 monthly. Finally, the rapid job bounceback in May and June 2020 likely saw an average of 1 million workers per month gaining access to ESI on net.

This analysis tells us two things. First, the COVID-19 shock shows up strongly in this data, with the huge rise in separations (mostly layoffs) leading to very large increases in workers losing access to ESI in March and April of this year. Second, even during months in a steadily improving labor market (such as between 2015 and 2019), there is substantial churn in employer-based health insurance, with millions of working people gaining and losing access each month. All else equal, it seems likely that workers are not well served by this churn even if it does not lead to a net loss of insurance coverage, as it requires time for workers and their families to navigate the new set of benefits and often requires leaving a preferred doctor or set of providers.

Using timely data on jobs in the economy to infer ESI changes during the COVID-19 shock

While the JOLTS data have the useful property of tracking gross employment changes, they are not the most timely data, nor do they constitute the best available source of net employment changes. Instead, the Current Employment Statistics (CES) program of the Bureau of Labor Statistics (BLS) provides a monthly, high-quality measure of the total number of jobs in the economy. The JOLTS data tend to lag the CES data by roughly one month.

Using the CES, we can again match employment by industry with our estimates of ESI coverage by industry from the 2018 ASEC to infer likely changes in ESI coverage during the COVID-19 crisis. A full set of industry estimates is available in Appendix Table 2, but these results are summarized in Figure B. As with our analysis of the JOLTS data, the industries we track in this data set constitute the large majority of total employment.

Figure B

This figure shows that job losses in March and April were consistent with roughly 9.0 million workers losing access to ESI. Between April and July, however, job gains were consistent with roughly 2.9 million workers gaining access to ESI. Given that the CES is our best timely measure of net employment changes, these inferences are probably our best measure for what the COVID-19 shock has done to ESI coverage. Between February and July (the full timespan of data coverage of the COVID-19 shock), the net result is a reduction of 6.2 million workers with ESI.

As ESI shrinks, is there a safety net for U.S. workers?

Those losing access to health insurance through their own employer may pay for continued temporary coverage under COBRA2 or qualify for public insurance (like Medicaid); switch to another employed family member’s policy; or access insurance through the health insurance “marketplace exchanges” established by the Affordable Care Act (commonly known as “Obamacare”).

Data on coverage in public insurance or through the ACA marketplaces are less timely than employment data, so the best inference to be made about the ability of workers losing ESI to transition into these alternative forms of coverage is based on historical experience. Gangopadhyaya and Garrett (2020) look at this historical experience and provide estimates from 2014 to 2018 on health insurance coverage by employment status. Figure C summarizes some of their key findings, breaking down insurance coverage status for adults under the age of 65 who are employed, unemployed, or not in the labor force.

Figure C

Unsurprisingly, the employed are far more likely to have ESI coverage than the unemployed (with those not in the labor force at all sitting somewhere in between). Unemployed workers and those not in the labor force are also far more likely to be covered by Medicaid. Perhaps surprisingly, the share covered through the ACA marketplace exchanges is pretty similar for all three groups.

These data indicate strongly that it is Medicaid, not the ACA marketplace exchanges, that does the heavy lifting of providing a health insurance safety net for those workers who lose ESI. Gangopadhyaya and Garrett (2020) also note that the share of the unemployed covered by Medicaid is substantially higher in the 35 states (including Washington, D.C., as a “state”) that accepted the Medicaid expansions offered by the ACA (35.8%) than it is in the 16 states that have still not accepted these expansions (16.4%). This 19.4 percentage-point gap in Medicaid coverage explains 97% of the 19.9 percentage-point gap in uninsurance rates for unemployed people in these groups of states (uninsurance among the unemployed averages 22.6% in states that have expanded Medicaid, but 42.5% in states that have not). In short, Medicaid is incredibly important—yet still underpowered—in providing a health insurance safety net for unemployed workers and their families.

Dorn (2020) uses these estimates, along with data on employment and unemployment from the Current Population Survey (CPS), to infer what has happened to overall rates of uninsurance during the COVID-19 shock. He finds that between February and May, 5.4 million workers likely lost health insurance due to layoffs.

Dorn notes a number of reasons why this 5.4 million is an imprecise estimate, largely because the experience of job loss during the COVID-19 shock might have different implications than job loss experienced during the recovering labor market of 2014–2018.3 One issue that might be important is that a large number of people who lost employment in the wake of the COVID-19 economic shutdown have been classified in the CPS data as not in the labor force rather than unemployed. This is likely a mistake even by the normal standards of the CPS reporting, and, from an economic point of view, anyone who lost a job due to COVID-19-related layoffs is almost certainly far more “like” the unemployed as a group than they are “like” those not in the labor force when it comes to how likely they are to be covered by health insurance.4

A new data set constructed precisely to measure the economic consequences of the COVID-19 shock is the Household Pulse Survey (HHPS) from the U.S. Census Bureau. The HHPS ran from the end of April until the middle of July. Its first data point, unfortunately, was collected after the worst of the job losses hit the U.S. economy. Nevertheless, the HHPS has been invaluable in measuring developments since this initial employment trough.

Table 1 presents results looking at a sample of workers who were employed and had access to ESI in the previous week. Among this sample, the survey tracks those who remained employed the next week, those who were no longer employed, and those who affirmed that their job loss was involuntary. It finds that of those who remained employed in the following week, about 99% reported retaining access to health insurance coverage, with 98% of these still-insured having access through ESI.5 Of those who lost jobs involuntarily, 85% report being covered by health insurance in the following week. This 15% loss in access to health insurance is the net result of 17.5% losing ESI and an increase of nearly 12 percentage points in the share of workers reporting access to public insurance (predominantly Medicaid). (Because the HHPS allows people to report more than one form of coverage, these numbers do not add up perfectly.)

Table 1

The HHPS data is quite noisy and volatile, which is to be expected given its newness, small sample size, and very high frequency (collected weekly). The HHPS also does not identify who is the policyholder, so it is impossible to determine which job losers with ESI coverage have continuing coverage through their former employer or have switched to the policy of another employed family member. However, even in this data, the negative implications for retaining access to health insurance after losing a job are easily detectable.

Besides showing the sharp decline in access to ESI following job loss, the data in Table 1 also show a measurable uptick in the probability of laid-off workers reporting access to public insurance coverage. Figure D shows the share of all respondents to the HHPS who report having public insurance (not just those who were employed and with access to ESI in the previous week). The figure shows four-week moving averages of the share of the over-17 population covered by public health insurance. This measure has been rising steadily for the five weeks since mid-June, by a cumulative 4.3 million people.

Figure D

This is roughly consistent with an analysis by Aron-Dine, Hayes, and Broaddus (2020). They find that in a subset of states with timely data, which account for roughly two-fifths of total Medicaid enrollments in normal times, Medicaid enrollment had risen by 2.0 million people between February and June 2020. Extrapolated over all the states, this would be roughly 5 million additional enrollees.

On the one hand, it is certainly encouraging that public health insurance rolls are expanding to absorb the enormous ESI coverage losses of recent months. However, they have not expanded enough to absorb everyone who lost job-based coverage. Our estimate from Figure B was that 6.2 million workers likely lost the health insurance that they had from their own employer between February and July. Given that for each person who is covered under their own employer’s ESI plan, roughly two people on average are covered, once spouses and dependents are included, this means that closer to 12 million people have been cut off from ESI coverage due to job losses in recent months.6

Conclusion

The inefficiencies and problems caused by the U.S. system of tying access to health insurance to specific jobs is well known. The downsides of employer-based health insurance access have been made spectacularly visible by the COVID-19 shock—a shock that has cost millions of Americans their jobs and their access to health care in the midst of a public health catastrophe.

Delinking access to health insurance from specific jobs should be a top policy priority for the long term. The most ambitious and transformational way to sever this link is to make the federal government the payer of first resort for all health care expenses—a “single-payer” plan. The federal government already is the primary insurer for all Americans over the age of 65 and for households with incomes low enough to qualify for Medicaid. The advantages of a single-payer system are large, both in ensuring consistent access to medical providers that households prefer and in restraining the often-rapid growth of health care costs.

Absent a once-and-for-all switch to a single-payer system, policymakers can take smaller steps to delink health insurance from specific jobs. They could lower the age of eligibility for Medicare, raise the income thresholds for Medicaid eligibility, and/or incorporate into the ACA marketplace exchanges a public option that enrolls all workers without job-based insurance—even those with access to ESI if they prefer the public option instead. Policymakers could also require that employers either provide comprehensive and affordable insurance or pay a fee to help cover the costs of enrolling their workers in the public option.

Finally, the lowest-hanging fruit in the current crisis is to have the federal government pay all expenses for COVID-19-related testing and treatment. Given the historically rapid increase in uninsurance in the first months of the COVID-19 shock, policymakers should also allow all those without insurance to enroll in Medicaid, regardless of income, for the duration of the crisis.

The COVID-19 shock has exposed just how incomplete and threadbare the U.S. safety net and social insurance system is. We should begin building a better set of systems that provide economic security to U.S. workers.

Appendix

Appendix Table 1

Appendix Table 2

Endnotes

1. The methodology for these estimates is described in Bivens and Zipperer 2020. In the classification scheme of this report, those estimates were the gross losses to ESI in those opening weeks of the COVID-19 shock, with initial unemployment insurance (UI) claims serving as a proxy for the gross employment losses. The UI data is by far the timeliest indicator of labor market trends, which is why we (and so many other labor market analysts) relied on it very heavily in the opening weeks of the COVID-19 shock. However, this UI data is low quality as a measure of labor market churn, so as other data sources became available, we stopped using UI-based estimates of gross ESI losses.

2. The Consolidated Omnibus Budget Reconciliation Act, a federal law that concerns the continuation of group health care benefits after termination of employment.

3. For example, a large share of COVID-19-related layoffs so far have been temporary. Some small share of these workers might even continue to have access to ESI through their former employers, if these employers genuinely plan to bring workers back on staff as soon as the shock ends. Cutting the other way, the large number of hires in May and June of 2020 may well have led to fewer offers of ESI than normal, as risk-averse employers are unwilling to incur large fixed costs to rehire workers (i.e., these employers might be worried about the need to potentially shed workers in coming months in the face of virus resurgence).

4. See Shierholz 2020 on the issue of misclassification of unemployed workers in the CPS in recent months. Essentially, we think the very large majority of employment declines in March and April of this year were involuntary job losses, not voluntary withdrawals from the labor force. In this case, we think it makes sense to treat everyone who lost a job in March and April as functionally unemployed, not voluntarily out of the labor force.

5. The table reports that 96.7% have access to ESI the week after remaining employed. Since 98.7% report access to any form of coverage, ESI can explain (96.7/98.7)% of this retention, or 98%.

6. Roughly 160 million people in total were covered by ESI plans in 2018. There were roughly 155 million employed people in the United States before the COVID-19 shock. Common estimates of the share of employed workers who receive ESI through their own coverage hover between 45% and 55%, depending on exactly which groups of workers (full-time or part-time, under age 65 or over, for example) are examined. This implies roughly 80 million workers who have an ESI plan directly from their own employer. Given these numbers, each person covered by an ESI plan through their own employer must, by definition, be covering closer to two people overall.

References

Aron-Dine, Aviva, Kyle Hayes, and Matt Broaddus. 2020. With Need Rising, Medicaid Is at Risk for Cuts. Center on Budget and Policy Priorities, July 2020.

Bivens, Josh, and Ben Zipperer. 2020. “9.2 Million Workers Likely Lost Their Employer-Provided Health Insurance in the Past Four Weeks.” Working Economics Blog (Economic Policy Institute), April 16, 2020.

Bivens, Josh. 2018. The Unfinished Business of Health Reform: Reining in Market Power to Restrain Costs Without Sacrificing Quality or Access. Economic Policy Institute, October 2018.

Bivens, Josh. 2020. Fundamental Health Reform Like ‘Medicare for All’ Would Help the Labor Market: Job Loss Claims Are Misleading, and Substantial Boosts to Job Quality Are Often Overlooked. Economic Policy Institute, March 2020.

Bureau of Labor Statistics (BLS). 2020a. Job Openings and Labor Turnover Survey (JOLTS), interactive data on hires and separations by industry. Accessed August 2020.

Bureau of Labor Statistics (BLS). 2020b. Current Employment Statistics (CES), interactive data on payroll employment by industry. Accessed August 2020.

Census Bureau. Microdata from the Household Pulse Survey. Accessed August 2020.

Current Population Survey. Microdata from the Annual Social and Economic (ASEC) Supplement.

Dorn, Stan. 2020. The Covid-19 Pandemic and Resulting Economic Crash Have Caused the Greatest Health Insurance Losses in American History. Families USA, July 2020.

Gangopadhyaya, Anuj, and Bowen Garrett. 2020. Unemployment, Health Insurance, and the COVID-19 Recession. Urban Institute, April 2020.

Shierholz, Heidi. 2020. “Nearly 11% of the Workforce Is Out of Work with No Reasonable Chance of Getting Called Back to a Prior Job.” Working Economics Blog (Economic Policy Institute), June 20, 2020.

Key takeaways:

• Because older workers are more likely to be unemployed for long periods, have work-limiting disabilities, and live in areas of the country that were struggling even before the crisis, policies aimed at addressing these problems will especially benefit these workers.
• While infrastructure spending could help jump-start the post-pandemic recovery, policies must ensure that older workers participate in training and jobs programs related to these investments.
• Regulatory protections for front-line workers, especially older workers and others at heightened risk for contracting or suffering serious consequences from contagious diseases, need to be strengthened and updated using lessons learned from the pandemic.
• Employer-provided benefits result in spotty coverage and higher costs for older workers. The United States should catch up to other countries and provide sick leave, paid family leave, and health insurance through government programs rather than leaving these to the discretion of employers.

(See the companion blog post outlining steps needed to protect vulnerable older workers in the economic collapse caused by measures needed to combat the COVID-19 pandemic.)

Once the worst of the outbreak is over and social distancing measures are relaxed, policies to help older workers will be needed to ensure they share in the recovery.

Deficit-financed stimulus spending—needed to quickly bring the economy back to something approaching full employment—will help but not ensure broad-based prosperity. Policymakers also need to address power imbalances between employers and workers and target policies at disadvantaged workers, including unemployed older workers.

Older workers, as I discussed in my last blog post, may find it harder to get back in the job market after layoffs for a number of reasons. They may have health conditions that limit what they can do or they may feel forced to accept large pay cuts because some skills and knowledge they’ve built up aren’t transferable and may be undervalued by prospective employers. Absent policies to help these workers regain their footing, they may become “discouraged workers” who give up on the job search and retire before they’re ready to.

This post lays out a series of policies to address barriers to employment for unemployed older workers and to protect older workers from health and financial risks.

Consider policies to encourage employers to hire long-term unemployed workers

Older workers who lose their jobs in a recession are more likely to be unemployed for long periods. For example, a study of unemployed workers in the Great Recession found that only a third (34%) of adults ages 62 and older who lost jobs were reemployed within 12 months and only two-fifths (41%) were reemployed within 18 months. On average, an older worker’s chance of reemployment each month was about half that of the average worker age 25 to 34.

Policies to encourage employers to hire long-term-unemployed workers must be carefully assessed to gauge their effectiveness and minimize the negative impact on other workers. For example, enacting the Long-Term Unemployment Elimination Act would provide time-limited funding to local workforce development boards and community-based organizations to employ workers who have been unemployed for six months or more, along with providing other employment supports. Importantly, it includes provisions to discourage employers from displacing existing workers or rotating eligible workers through the program.

Currently, the Work Opportunity Tax Credit provides a targeted employment subsidy worth up to $6,000 for one year to employers who hire workers who receive government benefits, are disabled veterans, were previously incarcerated, participate in Vocational Rehabilitation programs, or are long-term unemployed.

Ensure older workers have a role in infrastructure projects

Low interest rates, unmet needs, and bipartisan support make it likely that infrastructure spending will play a role in stimulating the post-pandemic recovery. A Green New Deal and other infrastructure measures could help jump-start the economy and address the even bigger threat to human life and the global economy posed by global warming. However, we need to ensure that workers of all ages are trained and employed for this work. As a quick start, boosting transit funding, especially for buses and accessible transportation, could have multiple benefits for older workers, who are more likely than younger workers to be employed in the transportation sector. (Unless otherwise noted, all references to older workers’ employment shares are based on the author’s analysis of 2015–2017 American Community Survey microdata for workers ages 55–64.)

Another low-tech but effective way to reduce reliance on fossil fuels is rehabbing older housing to make it more energy efficient. Barriers to making these ultimately cost-saving investments, especially for low-income and elderly homeowners, include upfront costs, lack of information, and an understandable reluctance to have a work crew in one’s home. Though construction projects tend to favor younger workers, outreach efforts to overcome these barriers in communities where declining industries have left behind an aging workforce and a dilapidated housing stock could employ many lower-income older workers.

Other forms of job training and public investment, such as universal pre-K, should also take older workers into account. Many older workers currently work as teachers’ aides, and more could be trained to work in preschools.

Better target aid to hard-hit regions

More effective and better-targeted regional economic policies would also benefit older workers, who are more likely to be employed in declining industries and live in economically depressed areas. Unemployed older workers are often less able to relocate to find work because of family commitments and community ties. Homeowners in depressed areas may also have difficulty relocating if the value of their home has declined relative to the outstanding balance on their mortgage. Eligibility for some benefits, such as extended Supplemental Nutrition Assistance Program (SNAP) and unemployment insurance benefits, is partly based on regional economic indicators. These benefits are well targeted and should be expanded. However, the Opportunity Zones tax break enacted in 2017 with the stated goal of encouraging investment in low-income areas mainly benefits wealthy investors and contributes to gentrification.

Expand EITC benefits for workers without dependent children

Another overdue policy reform that could help older workers in the recovery is expanding eligibility for the Earned Income Tax Credit. The EITC in its current form depresses the earnings of older workers competing for the same jobs as workers with dependent children who are the main beneficiaries of the program, because supplementing the incomes of some low-paid workers allows their employers to pay lower wages. We should expand EITC eligibility and benefits for workers without dependent children, while increasing the minimum wage to offset the implicit subsidy the EITC provides to low-wage employers.

We should also consider expanding and promoting the Senior Community Service Employment Program, which provides temporary subsidies for training and employing low-income older workers. This program appears to have at least modest success at promoting longer-term employment.

Institute fair-hiring policies for formerly incarcerated people reentering the labor market

Among those workers who will face the greatest hurdles to employment are formerly incarcerated older Americans. Some states and counties have suspended bail and released prisoners early in response to the pandemic, and U.S. Attorney General William Barr has announced that more federal prisoners will be eligible for home confinement. These initiatives urgently need to be replicated around the country, especially for older prisoners who pose no threat to society. However, formerly incarcerated people reentering the labor market, whether on schedule or early, are doing so at the worst possible time. In addition to ensuring that economic stimulus measures are timely and sufficient to restore a tight labor market, we should promote fair hiring for people with arrest or conviction records.

Enhance use and enforcement of federal worker safety protections

The pandemic has laid bare the weakness of worker health and safety protections in the United States. Under the Trump administration, the Occupational Safety and Health Administration (OSHA) has failed to use even the weak powers at its disposal, let alone instituted an Emergency Temporary Standard for Infectious Disease to protect front-line workers in the pandemic. Protections for older workers, whistleblowers, and others at heightened risk need to be strengthened and updated to take into account lessons learned from the pandemic.

Protect and expand disability insurance and other social insurance programs

The vulnerability of older workers with underlying conditions in the COVID-19 pandemic should also serve as a caution against reforms aimed at moving beneficiaries off disability rolls and into the workforce, as the Trump administration proposed in its 2021 budget (though how the administration intended to accomplish this was unclear). Reforms to move people off of disability rolls are especially ill-advised in a weak labor market. Instead, we should increase access to benefits while expanding supports for workers with disabilities who are able to remain in the workforce.

Strict eligibility standards and a lengthy and complicated application and appeals process make it difficult for workers to access Social Security Disability Insurance benefits. Though SSDI applications are likely to rise sharply as more workers with disabilities lose their jobs, acceptance rates typically drop in recessions due to an increase in marginal applicants. Applicants with less education, language barriers, and transportation challenges are especially disadvantaged by the complicated application and appeals process. These barriers to access have only increased in recent years, contributing to a sharp drop in take-up over the past decade.

Many older workers with disabilities don’t even bother trying to apply for SSDI and simply apply for reduced Social Security retirement benefits at the early eligibility age of 62. This is disadvantageous, since disability benefits at any age are based on retirement benefits at the normal retirement age (currently 66), not benefits reduced for early retirement. Importantly, disabled workers who may be eligible for either type of benefit and can’t afford to wait to see if their disability application is accepted should apply for both disability and retirement benefits simultaneously. Beneficiaries who weren’t aware of this option or who developed a disability after applying for retirement benefits can still apply for disability benefits after the fact. The permanent closing of some Social Security offices and temporary closing of all offices during the pandemic make it less likely that applicants will be made aware of this option or of the potential financial advantage of delaying take-up of retirement benefits.

Some economists and policymakers are concerned that disability benefits may reduce labor force participation. However, expanding government supports for workers who remain in the workforce and removing obstacles to accessing benefits can encourage employers to hire older workers by reducing employer costs associated with accommodating workers with disabilities and by helping workers who develop health conditions that interfere with work exit the workforce. Even if improving access to benefits has a net negative effect on labor force participation, disability insurance is generally welfare-improving because it helps relatively healthy people who want to work find jobs while forcing fewer people in poor health to try to keep working.

Generally speaking, expanding social insurance programs like SSDI will tend to promote the hiring of older workers. The United States is unusual among advanced economies in its reliance on employers to provide health benefits and paid leave. Older workers are more expensive to insure and more likely to take short-term disability leave due to cancer and other illnesses associated with age, though younger workers take more time off for injuries, mental illness, and family caregiving. Social insurance such as Medicare for All and paid family leave would remove the cost of health care and paid leave from employer hiring decisions as well as shield older workers from high out-of-pocket costs.

Social insurance has many potential advantages over employer-provided benefits, including spreading costs over lifetimes, pooling risk widely, reducing incentives to deny coverage or care, and taking advantage of economies of scale and government bargaining power to restrain costs. If there is not the political will for large-scale expansions of social insurance such as Medicare for All in the aftermath of the pandemic, policymakers could take more incremental approaches, such as creating a public option or Medicare buy-in, to leave less of workers’ coverage to the discretion of employers and to minimize potential disincentives to hiring older workers.

Expand Social Security to forestall a looming retirement crisis

Even in a best-case scenario, the recession will likely result in more workers retiring earlier than planned. We should expand Social Security benefits and revenue to forestall a looming retirement crisis caused by the decline of secure employer pensions in favor of do-it-yourself 401(k) plans, among other factors. It’s worth noting that Social Security and traditional pensions act as automatic stabilizers when the economy is operating below capacity due to a decline in overall spending. Social Security and traditional pensions allow workers to retire regardless of economic conditions and inject needed funds into the economy. In contrast, 401(k)-style plans tend to exacerbate business-cycle gyrations.

• Boost wages and salaries by allowing employers to redirect money they are spending on health care costs to their workers’ wages.
• Increase job quality by ensuring that every job now comes bundled with a guarantee of health care—with the boost to job quality even greater among women workers, who are less likely to have employer-sponsored health care.
• Lessen the stress and economic shock of losing a job or moving between jobs by eliminating the loss of health care that now accompanies job losses and transitions.
• Support self-employment and small business development—which is currently super low in the U.S. relative to other rich countries—by eliminating the daunting loss of/cost of health care from startup costs.
• Inject new dynamism and adaptability into the overall economy by reducing “job lock”—with workers going where their skills and preferences best fit the job, not just to workplaces (usually large ones) that have affordable health plans.
• Produce a net increase in jobs as public spending boosts aggregate demand, with job losses in health insurance and billing administration being outweighed by job gains in provision of health care, including the expansion of long-term care.

While the overall effect of fundamental health reform on the labor market would be unambiguously positive, this does not mean policymakers should ignore the distress caused by job transitions forced by this reform. Specifically, policy support should be provided to help displaced health insurance and billing administration workers move into new positions. But we should not let critics of Medicare for All inflate the scale of this transition challenge or falsely present the number of jobs displaced in individual sectors as the net effect of reform on labor markets. The number of health insurance and billing administration workers who would need to transition implies an increase in the rate of overall job market churn that is relatively small: Job losses for these workers would be equivalent to one-twelfth the size of economywide layoffs in 2018.

Background: The need for fundamental health reform

Currently, despite the significant gains in health care coverage spurred by the passage of the Affordable Care Act (ACA) in 2010, roughly 23 million Americans between the ages of 19 and 64 are uninsured, and another 64 million are underinsured (Collins, Bhupal, and Doty 2019).1 In addition to problems with access, the American health care system also suffers from excess costs.2 While excess health care cost growth has slowed notably in the last decade, it would be prudent for policymakers to try to keep this cost growth in check with significant policy reforms rather than simply hoping for the best going forward. Some highly important health-related prices have begun rising rapidly in the very recent past. Insurance premiums, for example, rose 20% in 2019.3 Overall spending on prescription drugs rose more than 9% between the fourth quarter of 2018 and the fourth quarter of 2019—the largest year-over-year change since 2015.4

Bivens 2018b provides data demonstrating that health spending in the U.S. is higher than in advanced peer countries and has risen faster over time—and yet continues to buy worse health outcomes. The higher and faster-growing spending of the United States is driven by faster growth of prices, not by growth in the volume of health care goods and services consumed. Further, international evidence shows that a key component of controlling cost growth is a strong public role in setting and negotiating the prices of health care goods and services.

A fundamental reform like Medicare for All (M4A) would make coverage universal. Further, by providing a counterweight to (or outright eliminating) the substantial market power that keeps prices high and that is currently wielded by many key players in the health care sector (e.g., insurance companies, drug companies, specialty physicians, and device makers), such a reform could also have great success in containing health care cost growth. This could in turn provide relief from many of the ways that rising health costs squeeze family incomes.

An underappreciated benefit of such a reform is that it would also lead to a much better functioning labor market in many areas. Job quality would increase, job switching would become less stressful, better “matches” between workers and employers would boost productivity, and small businesses would be much easier to launch.

Despite the fact that M4A could deliver these large benefits to efficient labor market functioning, the policy often comes under fire from critics making highly exaggerated claims about the potential job loss that could occur under such a reform. The grain of truth in some of the claims is that, like any productivity improvement, the adoption of a reform like M4A would require the redeployment of workers from one sector (the health insurance and medical billing complex) to other sectors (mostly the delivery of health care). But there is little in the M4A-induced redeployment of workers that would greatly stress the American labor market over and above the uncertainty and churn that characterizes this labor market every year. Smart policy could make this redeployment eminently manageable for those workers who would be required to make the transition.

This brief highlights some labor market implications of M4A and critically examines claims that large job losses in the health insurance and billing administration sectors would make M4A an undesirable policy.

Health reform as labor market policy: Key effects for workers

Fundamental reforms like M4A could greatly aid labor market outcomes for U.S. workers. The most obvious benefits would be higher wages and salaries, increased availability of good jobs, reduced stress during spells of job loss, better “matches” between workers and employers, and greater opportunity to start small businesses.

Higher cash wages and salaries

Medicare for All could increase wages and salaries for U.S. workers by reducing employers’ costs for health insurance—freeing up fiscal space to invest in wages instead. The share of total annual compensation paid to American employees in the form of health insurance premiums rather than wages and salaries rose from 1.1% in 1960 to 4.2% in 1979 to 8.4% in 2018.5 If this post-1960 increase had been only half as large—and employers had spent the health cost savings on wages and salaries—the take-home wages of American workers would have been almost $400 billion higher in 2018.6 Given that the share of total compensation spoken for by health insurance premiums is starting from a high base today, any reform that managed to slow the excess growth of health spending going forward would go a long way in making space for faster growth of cash compensation.7

Increased availability of ‘good jobs’

Medicare for All could increase job quality substantially by making all jobs “good” jobs in terms of health insurance coverage and by increasing the potential for higher wages. While the definition of a “good job” is always going to be a bit imprecise, the vast majority of U.S. workers would say that a good job is one that pays decent wages and that also provides the health insurance coverage and retirement income benefits that most of today’s workers can only reliably access through employment. Nearly half of jobs fail this test on account of health care coverage alone: In 2016, 46.9% of workers held jobs in which their employer made no contributions to the workers’ health care; for workers in the middle fifth of the wage distribution, 42.9% held jobs in which the employer made no contribution to their health care (EPI 2017).

By making health coverage universal and delinking from employment, M4A would make it far easier for employers to offer good jobs in this regard, as every job would now be accompanied by guaranteed health care coverage. Further, as noted above, wages and salaries would have substantial room to grow if health care costs were taken off of the backs of employers. Schmitt and Jones (2013) estimate the share of good jobs—jobs that clear a specified wage floor8 and provide health and retirement coverage—in overall employment each year between 1979 and 2011. They then look at various policy changes that would boost this share. They find that providing universal health coverage would boost the probability that any given job in the economy is a good job by almost 20%—and that’s even before any potential boost to the share of jobs that are good jobs coming from cash wage increases provided as employers shed health care costs.9 The boost to job quality from making health coverage universal would be even greater for women workers, as women are currently less likely to receive employer-sponsored health insurance benefits from their own employers.10

Less damaging spells of joblessness

Medicare for All could make job losses and transitions less stressful by delinking employment and access to health insurance, emulating the universal access to health care offered by our rich country peers. The U.S. is unique among the rich countries of the world in how much it ties crucial social benefits—like health insurance and retirement income—to specific jobs. Hacker (2002) has referred to this arrangement as the “divided welfare state,” with some Americans having relatively full access to health and retirement security while others have access to virtually none, all based on the specific jobs they have. This makes some jobs in the U.S. economy especially valuable, and hence especially damaging to lose. Manufacturing workers without a college degree, for example, likely incur enormous income and social benefits losses in the event of job loss stemming from either automation or trade. The ability of universal, public social benefits to make individual job losses less damaging has been long recognized by social scientists (see, for example, Estevez-Abe, Iversen, and Soskice 2001).

Smooth job transitions contribute to economic dynamism by helping ensure that vacancies are filled quickly by appropriate workers and that unemployed workers can quickly find new jobs that make good use of their skills. Smooth job transitions will also be an important components of meeting crucial policy goals such as mitigating greenhouse gas emissions with wholesale changes in how energy is created. Policies that make job transitions easier and inspire less resistance from workers should be encouraged. Fundamental health reform that, like M4A, guarantees access to insurance regardless of one’s current job status is a key part of making such transitions easier.

Better labor market matches between workers and employers

Medicare for All could decrease inefficient “job lock” and boost small business creation and voluntary self-employment. Making health insurance universal and delinked from employment widens the range of economic options for workers and leads to better matches between workers’ skills and interests and their jobs. The boost to small business creation and self-employment would be particularly useful, as the United States is a laggard in both relative to advanced economy peers.

Substantial evidence indicates that our current system of employer-sponsored insurance (ESI) creates significant “job lock”—a condition in which workers who don’t want to lose their current ESI stay in their current jobs rather than make transitions that would better meet their needs. In a comprehensive review of this literature, Baker (2015) finds:

The likely range of a job-lock effect is a reduction in turnover—the rate at which people leave jobs—of 15–25 percent among workers with EPHI [employer-provided health insurance, or ESI]. With normal turnover for prime-age workers (people ages 25–54) in the range of 15–20 percent per year, this job-lock effect implies a reduction in annual turnover of around 4 percentage points among prime-age workers with [employer-provided health insurance, or ESI].

Making employment decisions based on access to ESI rather than on other criteria—such as work–life balance, cash wages, and commuting distance—can lead to employment “matches” that are less productive and that decrease overall worker welfare relative to job choices that are not constrained by the availability of health insurance.

More small-business formation

Despite policymakers’ frequent claims that they seek to support small businesses in the U.S. economy, the United States has a notably small share of small-business employment relative to our rich country peers. In 2018, for example, the U.S. was dead-last among the members of the Organisation for Economic Co-operation and Development (OECD) in its share of self-employment, at just 6.3% of employment. Countries that are frequently portrayed in U.S. business reporting as being choked by regulation—like Spain, France, and Germany—have far higher shares of self-employment, at 16.0%, 11.7%, and 9.9%, respectively (OECD 2020).

Besides a low share of self-employment, the U.S. also had significantly lower shares of overall employment in small businesses, across nearly all industrial sectors. The latest OECD data show that the U.S. share of employment in enterprises with fewer than 50 employees is lower than in any other country except for Russia (OECD 2018, Figure 7). In an earlier overview of trends in employment by firm size, Schmitt and Lane (2009) highlight how health care policy plays two key roles in potentially explaining cross-country trends. First, because health care is nearly universally provided in other rich countries, workers choosing to start their own businesses in those countries do not face a cost confronting would-be entrepreneurs in the U.S.: the loss of ESI. Second, small businesses in the U.S. are at a distinct disadvantage in recruiting employees because the cost of providing health care coverage is significantly higher for small companies.11

Employment effects of fundamental health reform: gains in health care, losses in insurance and billing—with likely economywide net job gains from rising economic demand

Like all positive productivity gains, Medicare for All would be more likely to increase the total number of jobs in the U.S. economy, even as health reform leads to the redeployment of workers from some sectors and into others.

Despite the many labor market benefits of fundamental health reform like M4A, many critics have claimed that such reform would lead to a loss of jobs. This claim is misleading. One small grain of truth to it is that the universal provision of health insurance would allow people who would strongly prefer not to work (or not to work full time), but who have remained in their current jobs in order to retain health insurance, to be free to quit. This type of voluntary reduction in labor supply following a health reform would be strongly welfare-improving. For example, the ACA was clearly associated with a large increase in parents with young children transitioning to part-time work (see Jørgensen and Baker 2014). To the degree this occurred because these parents no longer needed to work full time to obtain ESI, and they preferred spending more time with their children for reasons of work–life balance, it should be seen as a clear win for the policy.

Generally, people expressing concern about job loss stemming from a policy are concerned about involuntary job loss that leads to a higher level of unemployment in the economy. Unemployment is almost entirely a function of the level of aggregate demand: spending by households, businesses, and governments.12 The effect of fundamental health reform on the level of aggregate demand depends in turn on the balance of increased public spending and the means of financing this spending. All else equal, more public spending will boost aggregate demand and create jobs, while higher taxes will reduce aggregate demand and restrain job growth. Further, the progressivity of taxes used to finance fundamental health reform will also condition its effect on aggregate demand. The more progressive the taxes that finance health reform, the less they will drag on job growth. Increased public spending combined with progressive tax increases would almost certainly boost the level of aggregate demand and lead to lower unemployment, all else equal.

While the overall number of jobs and the level of unemployment in the economy is largely a macroeconomic issue determined by aggregate demand, claims that fundamental health reform like M4A will lead to job loss sometimes sound plausible because it is easy to envision the specific jobs that might be displaced: jobs in the health insurance and billing administration sectors. But these job displacements would be balanced by likely job gains in other sectors—most particularly in health care delivery. The health insurance coverage expansions of M4A will boost demand for health care goods and services, and workers will need to be hired to meet this demand.

Job losses in the health insurance and billing administration sectors

A recent analysis of the economic effects of M4A (Pollin et al. 2018) includes the projection that up to 1.8 million jobs in the health insurance and billing administration sector (the divisions of hospitals and doctors’ offices dedicated to administrative processing of bills and payments) could be made redundant. These potential 1.8 million lost jobs are frequently presented as if they constitute the net employment effect of M4A.13 This is a deeply flawed misrepresentation of Pollin and his colleagues’ work. In fact, their estimates are a gross (not net) measure of job displacement or “churn”—the regular process of workers starting and leaving jobs during the course of their work lives. Relative to the scale of other gross measures of job churn, the churn associated with M4A is not large.

It is true that one source of cost savings from the introduction of M4A is the reduced demand for insurance and billing administration. In turn, this reduced demand would shift employment out of these sectors. This could certainly cause challenges and economic distress for the workers within these sectors who are directly affected. But for some perspective, it is worth noting that 21.5 million workers were laid off in 2018 (BLS 2020b). If the 1.8 million workers that Pollin et al. (2018) identify as potentially being displaced by M4A were forced to transition over the four-year phase-in commonly identified with M4A plans, this would increase the national rate of layoffs by about 2%. It is also worth noting that even within just the finance and insurance sectors, there have been 1.7 million layoffs in the past four years (BLS 2020b). And yet it’s safe to say that very few people even in the business press have made any note of this. This is not a shock: Our economy generates a huge amount of job churn every year. This churn is the hallmark of growth in productivity—getting more economic output with fewer inputs. While productivity growth can indeed put downward pressure on jobs in the sector experiencing it directly, Autor and Salomons (2018) demonstrate that productivity gains within a given sector strongly boost job growth in other sectors, as the savings to households and businesses stemming from enhanced productivity increase purchasing power that supports demand for these other sectors’ outputs.

If workers in the insurance or billing administration sectors were particularly hard-pressed for reemployment prospects because of geographic isolation or low average levels of educational credentials, their displacement might pose particular concern to policymakers. But employment in the health insurance and billing administration sectors is not particularly geographically concentrated,14 and Pollin et al. (2018) show that 56.5% of workers in these sectors have a four-year college degree or more education, a far greater share than the overall labor force (in 2018, 37.6% of workers had a four-year degree or more education, according to EPI 2020b).

Substantial likely job gains in the health care sector

While it may seem counterintuitive, fundamental health reform like M4A is almost guaranteed to substantially expand employment in the health care sector overall, even taking reduced billing administration employment into account. Often people hear that fundamental reform is aimed at cost containment and then imagine that part of this cost containment will take the form of fewer jobs providing health care, but this is not necessarily the case. As noted before, the U.S. is an outlier in terms of how much it spends on health care, but its health care workforce as a share of the total workforce is not out of line with shares in other countries. For example, in 2017 the health care workforce in the U.S. was equal to 13.4% of the overall workforce, while the share averaged 12.9% in the 20 other richest OECD countries.15 Additionally, seven of these other countries had health care workforce shares equal to or higher than the U.S.’s 13.4%.16

Pollin et al. (2018) estimate that expanded access to health care could increase demand for health services by up to $300 billion annually. Given the current level of health spending and employment, this would translate into increased demand for 2.3 million full-time-equivalent workers in providing healthcare.17 Obviously all of the workers displaced from the health insurance and billing administration sectors could not necessarily transition into these jobs seamlessly, but well over 10% of workers in the health insurance sector, for example, are actually in health care occupations (e.g., they are doctors or nurses).18

Further, several M4A plans have provisions to pay for long-term care services. Reinhard et al. (2019) have estimated that in 2018, Americans provided roughly 34 billion hours in unpaid long-term care. If this care was divided up among full-time paid workers, it would require 17 million new positions. Of course, not all of this currently unpaid care would be converted into paid positions in the job market. But if even 10% of unpaid care translated into new jobs, it would create enough new demand for workers to essentially offset the displacement of workers in the health insurance and billing administration sectors.

The upshot: M4A creates a small amount of manageable churn but increases the overall demand for labor and boosts job quality

The job challenge relating to a fundamental health reform is managing a relatively small increase in job churn during an initial phase-in period. Most Medicare for All plans explicitly recognize and account for the costs of providing these workers the elements of a just transition. As noted previously, this sort of just transition is far easier when health care is universally provided.

Besides this challenge, the effect of fundamental reform like M4A on the labor market would be nearly uniformly positive. The effect of a fundamental reform like M4A on aggregate demand is almost certainly positive and will therefore boost the demand for labor. The number of jobs spurred by increased demand for new health care spending (including long-term care) will certainly be larger than the number displaced by realizing efficiencies in the health insurance and billing administration sectors.

Finally, the introduction of fundamental health reform like M4A—particularly reform that substantially delinks health care provision from specific jobs—would greatly aid how the labor market functions for typical working Americans. Take-home cash pay would increase, job quality would improve, labor market transitions could be eased for employers and made less damaging to workers, and a greater range of job opportunities could be considered by workers. The increased flexibility to leave jobs should lead to more productive “matches” between workers and employers, and small businesses and self-employment could increase.

Fundamental health reform would benefit typical American families in all sorts of ways. Importantly, contrary to claims that such reform might be bad for jobs, this reform could substantially improve how labor markets function for these families.

About the author

Josh Bivens joined the Economic Policy Institute in 2002 and is currently EPI’s director of research. His primary areas of research include mac­roeconomics, social insurance, and globalization. He has authored or co-authored three books (including The State of Working America, 12th Edition) while working at EPI, has edited another, and has written numerous research papers, including many for academic journals. He appears often in media outlets to offer eco­nomic commentary and has testified several times before the U.S. Congress. He earned his Ph.D. from The New School for Social Research.

Endnotes

1. Underinsurance includes coverage gaps throughout a year.

2. “Excess costs” typically refers to health care costs that are rising faster than other economic benchmarks, such as overall gross domestic product. The Congressional Budget Office, for example, defines excess costs as the percentage change in health care costs per beneficiary minus the percentage change in per capita gross domestic product (Banthin 2017).

3. Author’s analysis of data from BLS 2020a.

4. Author’s analysis of data from BEA 2020, Table 2.4.5U, line 120.

5. Data from BEA NIPA Table 7.8, line 17, divided by data from BEA NIPA Table 2.1, line 2 (BEA 2020).

6. If the share of total compensation directed toward premiums had grown by just 3.65 percentage points rather than the actual increase of 7.3 percentage points between 1960 and 2018, and the difference had all been directed toward increased wages and salaries, then wages and salaries in 2018 would have been higher by an amount equal to 3.65% of total compensation of employees in that year ($10.93 trillion), or $399 billion (BEA 2020).

7. A quick example may help make the point. If health insurance premiums rose by 7% per year, they would double in 10 years. If growth of other forms of compensation remained flat, this would lead to the share of health insurance premiums in total compensation doubling in 10 years. If premiums started from 1% of total compensation in the base year (as in 1960), this doubling would only “crowd out” 1% of total compensation that could be taken in the form of cash wages and salaries. If instead premiums started from a base of 8.4% of total compensation (as in 2018), this doubling would “crowd out” 8.4% of total compensation that could be taken in the form of cash wages and salaries.

8. The wage floor Schmitt and Jones specify for a good job is the median wage of men in 1979, adjusted for inflation. When adjusted for inflation into 2019 dollars using the CPI-U-RS, the 1979 men’s median hourly wage is $21.07 (EPI 2020a).

9. Specifically, in Table 1 Schmitt and Jones report that the share of good jobs would rise from 24.1% to 28.8% with the introduction of universal health coverage. Dividing this 4.7-percentage-point increase by 24.1% yields a 20% increase.

10. See Schmitt and Jones 2013, Table 2.

11. For evidence on the cost of providing health insurance by employer size, see Hertel-Fernandez, Gould, and Bivens 2009, Figure C.

12. For an explanation of how aggregate demand determines the level of unemployment, see Bivens 2018a.

13. See Pradhan 2019 for an example of these numbers being presented as the overall effect of M4A on jobs.

14. For example, if one sums the share of employment in health insurance, hospitals, and medical offices for each U.S. state, this share is essentially perfectly predicted by the state’s population share (correlation coefficient of 1.0). This is notably not true, for example, if one does the same exercise for manufacturing employment and state population shares (correlation coefficient of 0.8). Author’s analysis of data from BLS 2020c.

15. Data are from the OECD Health Statistics program (OECD 2019). The 20 OECD countries compared with the U.S. are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, and the United Kingdom. Data for Canada and Japan are from earlier years (2016 and 2015, respectively) because data for 2017 are unavailable. Without Italy and Spain (both of which have very low health care workforce shares, below 8%), the U.S. would be very slightly below the OECD average for its share of the health care workforce.

16. The seven countries are Denmark, Finland, France, Netherlands, Norway, Sweden, and Switzerland.

17. In 2018, spending on health care services was $2.35 trillion (data from BEA 2020, NIPA Table 2.3.5), while full-time-equivalent employment was 18.25 million (BEA 2020, NIPA Table 6.5D). This translates into $129,000 in health spending per full-time-equivalent job. Dividing $300 billion by $129,000 yields the 2.3 million new full-time-equivalent workers needed to satisfy this new demand.

18. Author’s analysis of BLS 2019.

References

Autor, David, and Anna Salomons. 2018. “Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share.” Brookings Papers on Economic Activity Conference Drafts, March 2018.

Baker, Dean. 2015. Job Lock and Employer-Provided Health Insurance: Evidence from the Literature. AARP Public Policy Institute, March 2015.

Banthin, Jessica. 2017. “Health Care Spending Today and in the Future: Impacts on Federal Deficits and Debt.” Congressional Budget Office briefing, presented to a conference organized by the Center for Sustainable Health Spending, Washington, D.C.

Bivens, Josh. 2018a. Recommendations for Creating Jobs and Economic Security in the U.S.: Making Sense of Debates About Full Employment, Public Investment, and Public Job Creation. Economic Policy Institute, March 2018.

Bivens, Josh. 2018b. The Unfinished Business of Health Reform: Reining in Market Power to Restrain Costs Without Sacrificing Quality or Access. Economic Policy Institute, October 2018.

Bureau of Economic Analysis (BEA). 2020. National Income and Product Accounts, NIPA Tables (online database), Tables 2.1, 2.3.5, 2.4.5U, 6.5D, and 7.8. Accessed February 2020.

Bureau of Labor Statistics (BLS). 2019. “National Industry-Specific Occupational Employment and Wage Estimates.” NAICS 524114 – Direct Health and Medical Insurance Carriers. Last modified April 2, 2019.

Bureau of Labor Statistics (BLS). 2020a. Consumer Price Index program, “Databases, Tables & Calculators by Subject” (interactive data retrieval portal), Series ID CUUR0000SEME. Accessed February 2020.

Bureau of Labor Statistics (BLS). 2020b. Job Openings and Labor Turnover Survey (JOLTS), “Databases, Tables & Calculators by Subject” (interactive data retrieval portal), Series ID JTU00000000LDL and JTU52000000LDL. Accessed February 2020.

Bureau of Labor Statistics (BLS). 2020c. Quarterly Census of Employment and Wages Data (interactive data retrieval portal).

Collins, Sara R., Herman K. Bhupal, and Michelle M. Doty. 2019. Health Insurance Coverage Eight Years After the ACA: Fewer Uninsured Americans and Shorter Coverage Gaps, but More Underinsured. The Commonwealth Fund, February 2019.

Economic Policy Institute (EPI). 2017. State of Working America Data Library, “Health Insurance Coverage.” Last updated February 13, 2017.

Economic Policy Institute (EPI). 2020a. State of Working America Data Library, “Median/Average Hourly Wages.” Last updated February 20, 2020.

Economic Policy Institute (EPI). 2020b. State of Working America Data Library, “Wages by Education.” Last updated February 20, 2020.

Estevez-Abe, Margarita, Torben Iversen, and David Soskice. 2001. “Social Protection and the Formation of Skills: A New Interpretation of the Welfare State.” In Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, edited by Peter A. Hall and David Soskice. New York: Oxford Univ. Press. For a publicly available earlier version of the paper, see the 1999 paper prepared for presentation at the 95th American Political Association Meeting in Atlanta, Georgia: http://www.people.fas.harvard.edu/~iversen/PDFfiles/apsa992.pdf.

Hacker, Jacob. 2002. The Divided Welfare State: The Battle over Public and Private Social Benefits in the United States. Cambridge Univ. Press.

Hertel-Fernandez, Alexander, Elise Gould, and Josh Bivens. 2009. Health Care Reform—Big Benefits for Small Businesses. Economic Policy Institute, July 2009.

Jørgensen, Helene, and Dean Baker. 2014. The Affordable Care Act: A Family-Friendly Policy. Center for Economic and Policy Research, September 2014.

Organisation for Economic Co-operation and Development (OECD). 2018. Entrepreneurship at a Glance: 2018 Highlights. October 2018.

Organisation for Economic Co-operation and Development (OECD). 2019. OECD Health Statistics 2019 (online database). Last updated November 15, 2019 (accessed February 2020).

Organisation for Economic Co-operation and Development (OECD). 2020. “Self-Employment Rate” (interactive online data table). Accessed February 2020.

Pollin, Robert, James Heintz, Peter Arno, Jeannette Wicks-Lim, and Michael Ash. 2018. Economic Analysis of Medicare for All. Political Economy Research Institute, November 2018.

Pradhan, Rachana. 2019. “Medicare for All’s Jobs Problem.” Politico, November 25, 2019.

Reinhard, Susan, Lynn Friss Feinberg, Ari Houser, Rita Choula, and Molly Evans. 2019. Valuing the Invaluable 2019 Update: Charting a Path Forward. AARP Public Policy Institute, November 2019.

Schmitt, John, and Janelle Jones. 2013. Making Jobs Good. Center for Economic and Policy Research, April 2013.

Schmitt, John, and Nathan Lane. 2009. An International Comparison of Small Business Employment. Center for Economic and Policy Research, August 2009.

The budget would slash Medicaid and non-defense discretionary spending, eliminating or drastically shrinking programs targeted at low-income people, including programs benefiting seniors, such as the Low Income Home Energy Assistance Program. At first glance, the administration appears to spare middle-class seniors, a group with high voter turnout that tends to support the president and his party. Despite the president’s hints that Social Security and Medicare will be on the chopping block after the election, the budget would spare retirement benefits (except those for federal employees) and claims to achieve Medicare savings only by eliminating “excessive spending and distortionary payment incentives” while “preserv[ing] benefits and access to care.”

Some Medicare provisions in the president’s budget, such as site-neutral payments across different types of facilities, address genuine problems in how Medicare is administered. But the nearly half trillion in proposed savings from Medicare over 10 years includes provisions that would indirectly affect Medicare beneficiaries’ access to care, such as reducing payments to partially cover unpaid medical bills for Medicare beneficiaries. Since unlimited out-of-pocket expenses are a major cause of bankruptcy for older Americans in poor health, reducing these reimbursements would cause some providers to avoid treating Medicare patients who have expensive conditions and limited resources—and would surely lead to hospital and clinic closures in underserved areas. Middle-class seniors and providers who treat them wouldn’t be spared, since lower-middle-class seniors ineligible for Medicaid are those most likely to spend a high share of their income on health care. The problem of uncompensated care would be compounded by the administration’s attempts to roll back Medicaid expansion under the Affordable Care Act (ACA), which has helped hospitals treating low-income and uninsured patients in expansion states.

In general, older Americans in poor health would be disproportionately affected by the president’s plan to cut a whopping $1 trillion in funding for Medicaid and the Affordable Care Act over 10 years. Though much of the supposed health cost savings in the president’s budget is attributed to vague “reforms” that would supposedly save money without affecting beneficiaries, the administration’s parallel efforts to repeal the ACA through the courts would inevitably leave millions of Americans without insurance and others facing higher costs, especially people with preexisting conditions. Repealing the ACA would also reopen the Medicare Part D “doughnut hole,” hurting seniors with high prescription drug costs.

Additional cost savings in the proposed budget come from unspecified “reforms” to Social Security Disability Insurance (SSDI) that would supposedly reduce disability rolls by 5%. Administrative cuts (including field office closings), reduced awareness of available benefits, and pressure on “outlier” administrative law judges to deny benefits have already contributed to a decline in the number of people accessing these benefits.

Such “magic asterisk” cuts to popular social insurance programs, along with rosy economic projections, are an attempt by the administration to be seen closing the giant hole in the budget caused by the president’s tax cuts. Alongside these vague promises, however, are punitive provisions, such as promoting Medicaid work requirements, that provide comparatively little savings but serve to shift attention from tax cuts favoring the wealthy to supposedly wasteful programs helping the poor. The evidence clearly shows, however, that work requirements predominantly create administrative barriers to coverage for people who should be exempt or are actually working.

Another gratuitous swipe at low-income Americans encourages states to increase Medicaid co-pays for some emergency department visits, based on the rationale that “Medicaid beneficiaries use the emergency department at an almost two-fold higher rate than the privately insured.” Though intended to conjure up an image of people abusing the system, the source for this statistic—a memo from the former deputy administrator of the Centers for Medicare and Medicaid Services—goes on to say that this is not due to widespread inappropriate use of emergency services among Medicaid beneficiaries, who tend to be in poorer health than the privately insured population. Instead, this is due to unmet health needs and a lack of access to alternative facilities (in Washington, D.C., for example, most urgent care clinics are located in higher-income neighborhoods). So to the extent that these higher co-pays would provide any budget savings, this would be at the expense of low-income beneficiaries forced to determine in advance whether their asthma attack or flu symptoms qualify as an emergency or risk a penalty for showing up at the ER.

Most seniors over 65 will not be directly affected by the proposed SSDI and Medicaid cuts because disabled beneficiaries transition to Social Security retirement benefits at age 66, and the president’s budget doesn’t propose cutting Medicaid payments for nursing home and other long-term care coverage. But the cuts would impoverish many older Americans before they reach age 65 because people are more likely to develop expensive and disabling medical conditions as they age. The same is true of Medicaid work requirements, since older workers—many in poor health—are disproportionately found among the long-term unemployed.

It’s human nature for people in good health with good jobs to assume that fortune will continue to smile upon them. But life often offers a corrective, and the administration may have overestimated the public’s—including seniors’—willingness to accept a budget that kicks people when they’re down.

Note: An earlier version of this blog post incorrectly stated that “an eight-day stay in intensive care would be a precondition for long-term care hospital services (the current standard is three days).” The proposed change, however, wouldn’t prevent Medicare beneficiaries from being admitted to long-term care hospitals, but would simply lower the payment rate. Though lower payment rates can indirectly affect access to care, this is not a direct benefit cut.

From 2017 to 2018, the official poverty rate fell by 0.5 percentage points, as household incomes rose modestly, albeit at a slower pace than the previous three years. This was the fourth year in a row that poverty declined, but the poverty rate remains half a percentage point higher than the low of 11.3% it reached in 2000.

Since 2010, the U.S. Census Bureau has also released an alternative to the official poverty measure known as the Supplemental Poverty Measure (SPM).

The SPM corrects many deficiencies in the official rate. For one, it constructs a more comprehensive threshold for incomes families need to live free of poverty, and adjusts that threshold for regional price differences. For another, it accounts for the resources available to poor families that are not included in the official rate, such as food stamps and other in-kind government benefits.

As shown in Figure A, a larger proportion of Americans are in poverty as measured by the SPM than as measured by the official measure. (Importantly, however, researchers who constructed a longer historical version of the SPM found that it shows greater long-term progress in reducing poverty than the official measure.) In 2018, the SPM increased by 0.1 percentage points to 13.1%. Under the SPM, 42.5 million Americans were in poverty last year, compared with 38.1 million Americans under the “official” poverty measure.

Figure A

The SPM data show a lower rate of child poverty than the official statistics, primarily as a result of the SPM’s inclusion of noncash income from government assistance programs. In 2018, the official child poverty rate was 16.2%—a decline of 1.3 percentage points from 2017. Using the SPM, the child poverty rate rose 0.3 percentage points to 14.5%, which is not significantly different than the 14.2% child poverty rate in 2017.

Because it incorporates noncash sources of income into its calculations, the SPM allows us to see the enormous impact that the full spectrum of government anti-poverty programs have in reducing hardship for millions of Americans. As shown in Figure B, government assistance programs are directly responsible for keeping tens of millions of people out of poverty. Social Security is, by far, the most powerful anti-poverty program in the United States. In 2018, it was responsible for keeping 27.3 million people, or 8.4% of all people in America, above the SPM poverty threshold. Refundable tax credits, such as the Earned Income Tax Credit and the Child Tax Credit, kept 7.9 million people, or 2.4% of people in America, above the SPM poverty threshold. Smaller (but still vital) programs, such as the Supplemental Nutrition Assistance Program or SNAP (commonly known as “food stamps”) and Supplemental Security Income each prevented about 3 million people from falling into poverty.

Figure B

Government assistance programs were particularly important in keeping children out of poverty. As shown in Figure B, of the 7.9 million people that refundable tax credits lifted out of poverty, 4.2 million were children. Similarly, of the 3.9 million people that SNAP kept out of poverty, 1.3 million were children. Housing subsidies shielded over 900,000 children from poverty. Even Social Security—too-often thought of as strictly a program for older Americans—has a large impact on the welfare of children, lifting 1.5 million children above the poverty line.

With recent budget proposals calling for cuts to these programs, lawmakers need to recognize how critical these programs are for helping families stay afloat. The lowest-income households in America (the lowest two deciles of the income distribution) suffered the largest average percentage income losses of any income group during the Great Recession. Under such circumstances, there can be little justification for weakening the programs upon which many of these households rely.