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REPORT: The Impact Of Wage Parity on NYC Home Health Aides’ Benefit Eligibility

August 25, 2014

New York State’s “wage parity law,” which raised the wages of home health aides (HHAs) in New York City and surrounding metropolitan counties by approximately $2 an hour, may have unintended effects on those workers’ eligibility for public benefits and tax credits, a PHI report found.

PHI partnered with Wider Opportunities for Women to better understand how the increase in compensation might affect eligibility for basic supports such as the Supplemental Nutrition Assistance Program, the Earned Income Tax Credit (EITC), and the Child and Dependent Care Credit.

Part of New York State’s Medicaid Redesign initiative, the 2011 wage parity law equalized wage and benefit rates between the city’s personal care aides (PCAs) and HHAs.

Before wage parity, PCAs, known as home attendants in New York City, earned an entry-level hourly wage of $10 with benefits, while HHAs — despite having more training hours and being able to perform certain clinical tasks not expected of PCAs — started at just $8 an hour with limited or no benefits.

Wage parity, which was fully implemented in March 2014, corrects that imbalance by bringing HHAs’ wages and benefits up to the PCA level.

Benefit Cliffs and Plateaus

The relationship between wages, public benefits and tax credits is crucial for any low-wage worker, but particularly for home care aides who often work part-time, episodic hours. The PHI report highlights a potential, and unintended, consequence of wage increases: In certain cases, home care aides may find it in their interest to limit their weekly work hours in order to retain eligibility for certain benefits.

For example, the report shows that an unmarried home care aide with two children making $10/hour actually earns little additional monthly income (wages plus the cash value of public benefits and tax credits) when she increases her hours from 30 to 40 hours per week.

The cash value of basic supports drops off more quickly than wage income increases, creating an income plateau and a disincentive to work, the report explains. The hours worked between 30 and 40 hours yield an increase in income that is less than the minimum hourly wage.

Several scenarios — which vary according to family size and structure, access to benefits, and number of hours worked — are depicted in the report. Each yields a different “zone of financial security” for the worker.

The study also notes that the EITC results in true cash in hand, and is a benefit that is particularly well structured because it rewards work, rises as the aide’s income rises, and decreases at a relatively slow rate at higher income levels, creating a gradual decline rather than a benefit “cliff.”

“Under certain circumstances, it may indeed make economic sense for an aide to modulate her number of hours worked, in order to avoid working additional hours for little or no net reward,” write the report’s authors, PHI Strategic Advisor Steven Dawson and PHI New York Policy Director Carol Rodat.

Dawson and Rodat offer numerous recommendations — to aides, employers, counseling organizations, philanthropy and public funders, and policymakers — to address the problem posed by benefit cliffs and plateaus.

More information about the report is available at the PHI New York website.

— by Matthew Ozga

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