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News » Healthcare worker benefit cuts from $25 wage hike

Healthcare worker benefit cuts from $25 wage hike

CALIFORNIA, UNITED STATES — California’s new $25 minimum wage law for healthcare workers is raising concerns about potential cuts to employee hours and benefits. 

The law, which took effect on April 1st, aims to improve compensation for nurses, aides, and other frontline medical staff. 

However, some healthcare facilities are warning that the increased labor costs could result in layoffs and reductions in hours and benefits, including cuts to premium pay and vacation time.

The statewide $25 wage, signed last October, is set to begin in June for an estimated 426,000 workers. In its first year of implementation, it will provide an average $6,400 annual raise. 

Potential $73 billion deficit

However, California Governor Gavin Newsom, citing a potential deficit between $38 billion and $73 billion, has signaled openness to delaying implementation.

“The challenge for any health care organization is figuring out how to pay for the higher wages,” said Joanne Spetz, director of the Philip R. Lee Institute for Health Policy Studies at the University of California-San Francisco.

Spetz added that providers could boost revenues by bargaining for higher reimbursements from commercial insurers. Health systems could also reduce the services they offer, slow down on charity care initiatives, and cut or delay capital investments.

“Job killer”

Critics warn of potential hospital closures and higher costs for state and local governments. The California Chamber of Commerce labeled it a “job killer.”

The No SB 525 coalition, which included hospitals, doctors, and business and taxpayer groups, had said the bill would cost $8 billion annually. This would endanger services and lead to higher costs for state and local governments.

“We’ll see hospitals go out of service and we will see rural health clinics for sure be severely impacted and probably go out of business,” warned state Sen. Brian Dahle, a Republican who represents rural Northern California.

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