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REPORT: Measuring Wage Parity’s Impact on NYC Home Care Aides

June 23, 2014

A new report from PHI Medicaid Redesign Watch, The Impact of Wage Parity on Home Care Aides: How Better Wages Affect Public Benefits, Tax Credits, and Family Income examines how a recent increase in the wages of New York City home health aides from $8 to $10/hour affects workers’ eligibility for public benefits (e.g. SNAP/food stamps, housing and child care assistance, and Home Energy Assistance) and tax credits such as the Earned Income Tax Credit (EITC).

As part of New York’s Medicaid Redesign, Governor Andrew Cuomo (D) included a provision in law to bring the wages of home attendants and home health aides (who historically had been paid less though they had higher training standards and more responsibilities) into alignment. Together these workers comprise one of the city’s largest occupational groups, numbering 150,000, or one in seven low-wage workers. 

Knowing that about half of New York’s home care aides rely on public benefits to support their families, PHI decided to explore how the 25 percent wage increase would affect a family’s total income (the sum of wages, plus the value of public benefits, plus the value of tax credits). Because of the complexity of the interaction of these variables, PHI partnered with Wider Opportunities for Women (WOW), a nonprofit that focuses on the economic security of women and their families. The WOW Economic Security Simulator was used to assess total monthly income for aides living in different family situations and working anywhere from 20 to 55 hours per week.

The report concludes that overall, the wage increase has been a net benefit to most home health aides. However, the aides are still subject to a perverse system of public benefits that generally decreases assistance at the rate at which wages increase. As a result, many aides will hit a “benefit plateau” — that is, their total family income will remain virtually stable after working about 30 hours per week when the value of the benefits is taken into account. There is little or no incentive to increase work hours when those additional hours “pay” less than minimum wage as a result of decreases in public benefits. (See chart below, in which an aide’s total economic security increases by only $300 per month as she increases her work hours from 30 to 40 hours per week.) 

The report makes several recommendations to increase the financial security of home care aides, who provide vital services to individuals who as a result of age or disability need assistance to live independently:

For Home Care Aides: Provide individual aides seeking to maximize their “zone of economic stability” with one-on-one, confidential guidance from a counselor who is intimately knowledgeable of federal and New York City public benefit and tax credit criteria.

For Home Care Employers: Provide employees with access to confidential guidance from knowledgeable counselors, most likely by referring aides to organizations sophisticated in public benefit and tax matters. In addition, employers should support their employees by providing low-cost or no-cost access to tax preparers who are knowledgeable about the EITC and child care and dependent tax credits. For a single mother with two young children, the EITC can provide an additional $700/month in income or a 50 percent increase in family income.

For New York State and New York City Public Policymakers: Continue to work toward a more rational structuring of public benefits and tax credits — specifically, to better reward work. In particular, New York State should expand the percentage of the state EITC from 30 to 35 percent of the federal credit (such legislation was introduced in 2013 in the Assembly), and expand the eligibility ceiling for receiving 110 percent of the federal Child and Dependent Care Credit from $25,000 to $35,000. Similarly, New York City should increase the city’s EITC from 5 percent of the federal EITC to 10 percent.

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