(The Center Square) – A new California law raising the minimum wage for healthcare workers to $25 per hour will cost the state $4 billion as the state faces an escalating budget crisis amid falling tax receipts. With the state facing a deficit of $14 billion for the next year — or worse, if revenue projections continue to fall short — critics say this measure not harms healthcare system users, but puts the state in financial peril. 

 “Increasing the minimum wage to $23 per hour starting in 2024 and reaching $25 in 2026 for health care workers in medical facilities with 10,000 or more employees is fiscally irresponsible, particularly at a time when the state is facing a severe budget deficit,” said Sally Pipes, president and Thomas W. Smith Fellow in healthcare policy at the Pacific Research Center.

“Many on Medi-Cal are already having a hard time finding doctors to treat them because of low reimbursement rates these doctors receive from the government,” continued Pipes. “If those on Medi-Cal can find a doctor, they are facing very long waits for care.  This measure will definitely further harm those patients.” 

The law increases the minimum wage for employees at employers with more than 10,000 full time or equivalent employees, or facilities in counties with more than 5 million residents from $15.50 per hour today to $23 in June 2024, $24 in June 2025, and $25 in June 2026, with extended timelines until the $25 minimum wage for other types of facilities and employers. After a facility type reaches the $25 per hour minimum wage, the Director of Finance for California must calculate a new adjusted minimum wage each year that increases by the lesser of 3.5% or the non-seasonally adjusted  consumer price index. The new minimum wage applies to any employee in the health sector, including “food service staff” and “gift shop staff.” 

At the time of its passage, the California legislature concluded the fiscal impact for the bill was “unknown,” with a coalition of advocates led by SEIU California claiming “Care work has historically been undervalued by society. A recent report on the California nursing home workforce characteristics found that 1 out of every 2 Skilled Nursing Facility workers earns less than $20 per hour. These workers are also primarily women (81%) and workers of color (77%), with almost half of them identified as Hispanic.”