Who Cares?

Women in the homecare industry

By Janice Burns, Top Drawer Consultants
16 April 2007

How did we get (and remain) in this position? - Funding arrangements

Thousands of working women in New Zealand are caught in a triple bind. They suffer from poor pay, they’re located in an under-valued female-dominated occupation and they’re subject to government-funded contracting arrangements for their industry. Despite their precarious working conditions, these same women working in the homecare industry provide a service crucial to society and the wellbeing of vulnerable and elderly people.

My long time involvement in issues of pay equity meant I had always had a theoretical understanding of the issues facing women in female dominated caring occupations. In 1998 when I was one of four researchers involved in a study of homecare workers, however, I saw first hand the impact of low pay and casualised employment on both the women workers and the ability of provider organisations to provide quality services to clients. It seemed that everyone knew what the problems were and the consequences of those problems. Research I undertook in 2005 and 2006 for the National Council on the Employment of Women (NACEW) suggests that this remains the case. However, real solutions still appear elusive and constrained by an ideological straightjacket. Pity, because I think there are solutions.

The background

Homecare workers are predominately female and provide household management and personal care in the homes of people with a disability, most of whom are elderly. They are employed by about 110 private companies and not-for-profit organisations (the provider organisations) in a largely unregulated industry. The provider organisation may have as few as five staff or as many as several hundred in national companies. It is estimated that there are about 18-20,000 workers in home based care services.

The conditions for caregivers in the aged care and disability support sector workforce are very well known. They are likely to:

Work for hourly rates at or slightly above the minimum wage
Have work hours that are unpredictable and unreliable
Not be paid for travel time to and between clients
Have limited or no access to training
Have little or no sick or holiday pay
Have to undertake training in their own time at their own cost
Have inadequate access to supervision
Be sometimes exposed to hazardous or unpleasant working environments
Be un-unionised and have no minimum national employment agreement

Staff turnover in the home care sector has been estimated at around 39 percent (with poor wages being cited as the main reason for leaving). Turnover is particularly high in the first year of employment – the period for employers' investment in training. In some areas of the country where there is better paid seasonal or tourist work, the turnover is as high as 68 percent. Workers who do get training are likely to leave, using their training to gain better and more secure jobs elsewhere – for example, in the residential care setting where the hours are guaranteed.

One thing we know about the recipients of care is that they hate having a series of new carers and their experience of the care has as much to do with the relationship as what is actually done.

So what is the problem?

The problem is that the current situation is working for no-one – not the funders, not the provider organisation, not the homecare workers nor for many of the clients.

So why has this happened? Money, or lack of it is certainly a key (although not the only) reason.

Aged and disability support services are taxpayer funded by the government through the Accident Compensation Commission and the Ministry of Health to District Health Boards (DHBs) or directly to non-government organisations that contract for the homecare service provision. DHB’s also contract service provision to other private or not for profit organisations.

The contracts provide a set amount for services to a particular client, the money is connected to the client. Currently, a service provider gets between $16.50 and $18.00 for home management services and between $17-$20 for personal care. The actual amount will depend on the nature of the care. This is not negotiable – providers are “price takers”. When they compete with each other for a contract it is said to be on issues other than price – such as quality service and reliability of provision. The contract rate to the service provider is to cover all business costs including labour. Provider costs potentially include paying wages, holiday pay, paying for travel time and costs, paying for attendance and delivery of training, employing supervisors, equipment, uniforms and supplies, insurance, any building rental and (for private companies) making a profit.

Once allocated, the decision on how the contract funding is disbursed is an individual business decision although the Government did recently attempt to tag 80 percent of a funding increase for staff wages. A lack of monitoring means there is no way of knowing if this happened on the ground. How to ensure any funding increases are used to increase wages remains an ongoing (and seemingly insurmountable) policy debate.

The caregiver will get (on average) between $10.54 for household management and $11-12 for personal care. If the client dies, moves area or his or her needs change, the funding could cease or change – and the worker has lost income until a replacement client is allocated. Research suggests that only about 15-16 percent of employees actually receive travel costs sometimes or always. This is because most of the larger employees do not pay it.

Our 1999 research for the Ministry of Women’s Affairs included some examples of actual gross hourly rates after travel costs and travel time were taken into account. One worker on a pay rate of $10 an hour had an effective hourly rate in a week of $7.36. The hourly rate for another (who had more clients and more travel) dropped from $9.38 an hour to $7.63. So even when homecare workers receive the legal minimum hourly rate, many effectively have wages that fall below this. This does not happen in the State sector – so why does it happen to state funded workers?

No-one doubts the impact all of this has on the sustainability of service provision in an area of increasing demand and complexity.

How did we get (and remain in) this position?

Funding arrangements

Funding for homecare is based on a funder/provider split. Part of the ideology of the split is that the funder does not get involved in the provider’s internal business operation. Of course, all contracts do have quality and safety specifications and include quite direct clauses on providing culturally appropriate care for Māori. But they do not require any employment standards – even minimum legal requirements – to be met.

Other areas of government contracting provide a slightly different model. For example, in the purchase of goods and the provision of services such as cleaning in the public service there are relatively strong interventionist clauses such as the requirement to be environmentally friendly and sustainable and supporting local suppliers. However, in spite of being willing to ‘intervene’ in contracts to support other government goals, there is a terrible squeamishness about intervening on the pay and employment conditions of the staff of provider agencies. In only one of the three key government documents on contracting (‘good practice guides’ not ‘rules’) is the term ‘being a good employer’ mentioned – but never monitored.

I believe that providers’ assertion that improving the employment conditions for their employees is beyond their capacity in the current funding environment has some credibility. During the course of recent research I found that there appears to be no logical or empirical basis for the contract price currently offered to providers. Any institutional knowledge within the Ministry of Health on how the funding formula was established and how its currency is maintained seems to have long gone. Surely a funding formula would make explicit assumptions about wage levels and other quantifiable and justifiable business costs? For example, everyone knows that delivering quality and reliable home care involves travel and training – how are the costs of this factored into the funding formula? My own view is that the government provides periodic funding increases without a ‘bottom up’ assessment of true costs for care provision and an assessment of the adequacy of the funding principles.

The funder/provider split explicitly passes on the provision of care to a private company – that is, by definition, entitled to make a profit. Even not-for-profit organisations have overheads and business costs. They too need to be sustainable entities. Has the funding formula factored in an allowance for profit? It appears not.

Many of the care providers are private companies (often with shareholders). My research showed that there is queasiness (shown by some officials and experienced by homecare providers) about companies using taxpayers money allocated to assist vulnerable people making a financial profit. It seems that the government wants to have it both ways. If the model is to remain, then developing a funding formula that accounts for the actual costs of care provision – including a profit margin - is essential. But more fundamentally, this formula should include a review of the actual work and worth of home care work.

At the moment the government funds at a level that does not support the pay and employment equity goals it supports for its own staff. I find it interesting that the kinds of analysis on returns to investment that goes on in considering government funding of major sports or cultural events do not appear to happen in the homecare service arena. When funding for sports and cultural events are considered it is acknowledged that some returns on investment may be indirect or evident only in the longer term. I believe a similar analysis would provide similar benefits. At a guess these could include a reduction in the need for welfare ‘top ups’, less staff turnover, sustainable businesses providing stable employment, increased client satisfaction and reduced family stress. Finding the extra money to support fair pay and the acknowledged link between pay and quality, sustainable service seems to meet different ‘affordable’ hurdles.

If homecare workers (and residential care workers for that matter) were still part of the state sector, you can bet that they would be one of the first groups suggested for a pay investigation under the Government’s Plan of Action for achieving pay and employment equity. This would allow an assessment of the actual skills for the job in relation to male dominated work such as some trades work. Because the homecare occupation is currently outside the state sector (the focus for Phase 1 of the Plan of Action), this cannot happen now. There have been suggestions (including recently from the Minister of Labour) that subsequent phases of the Plan may include workers employed through contracting out. Lets hope so.

Valuing the work

Funding care at a level that supports only minimum wage level wages suggests a belief that it is a low skill occupation equivalent to stocking supermarket shelves and other entry level occupations. Considerable research exists to suggest this is erroneous.

Two facts combine to give a low value to homecare work. The first is a failure to describe the true nature of the work. What makes for quality care (from the client’s perspective at the very least) involves skills over and above those said to be required for this ‘low skill, low pay’ role. In particular, the importance of the social contact with and the emotional management of clients is not fully ascribed – particularly in the delivery of personal care.

Secondly, homecare is a female-dominated occupation performing emotional and practical caring work. We have long known that the sex of the worker performing the role is a stronger predictor of the compensation for the job than education, experience or unionisation. In addition homecare is seen as embodying work and behaviour that is often done for free in the home as part of a traditional female role. A bad combination in the pay business!

It is time that the work was properly described and evaluated. Only then can there be any confidence that the wage component of the funding contact fairly reflect the work being done.

All very well, but how to fix it?

Like every other sector, the quality of employers in the homecare industry varies. Some are better than others and some are probably in a better position than others (through economies of scale in the purchasing power of large companies) to pay higher wages. However, after conversations with providers, I am relatively convinced that even if they could afford to or were willing to pay more, the available margins would do little to substantially reduce the low pay and precarious work problem. This industry is based on labour – labour is by far and away the prime cost – labour in providing the care and that supporting the carers and keeping the business running.

Surprising international precedents exist for ‘interference’ in the contracting out environment. It is doubtful that anyone would hold America up as an exemplar of fair employment practices but many American states now have mandated wages rates for employees in companies receiving state government contracts. Called a ‘living wage’ it aims to reduce poverty of working people and allow workers and their families to participate and experience well being in their community. However, in order to make this possible, the contract price has to be based on a fair price

There is debate in the policy arena as to whether the principle of funding at an individual service level supports sustainable services (and sustainable livelihoods for workers). Pilot projects suggest that a different funding arrangement offers opportunities for funding for core and reliable hours for workers. It would be a start.

Then four steps could finally start to impact on the pay and conditions of homecare workers:

1. Undertake an assessment of the actual skills required for quality homecare work and the market rate for these skills

2. Assess the costs to the employer of building a quality and sustainable workforce

3. Develop a funding formula that fairly includes all the costs to provider businesses (including reasonable profit margins to assist business survival)

4. Develop government contracting minimum standards that requires evidence based on good labour practices of those receiving homecare provision contracts

This would include

fair pay and employment conditions
meeting legal requirements around provisions such as sick leave and holiday pay
covering all costs associated with the performance of the job

I predict that a high proportion of those currently involved in making disability support services policy and setting funding will come into contact with homecare and residential care services at some point in their lives. When it happens to our grandparents, our parents, favourite aunts our partners or (gasp!) to us, we will want the best. We will want highly skilled, engaged, compassionate and reliable care from someone who is motivated to come to work with us and feels rewarded for their efforts. Think about it. Some of us don’t have much time left.

Janice Burns
Top Drawer Consultants