The Labor Market for Direct Care Workers

As the baby boom cohort nears retirement age, the question of how to provide necessary health care and personal services to a growing elderly population has become a looming policy problem. Beginning in 2020, the number of Americans over the age of 65 will surpass the number of primary providers of formal and informal long-term care (women between the ages of 20 and 44). Perceptions of shortage and very high turnover in today’s direct care labor market are compounding the potential problem. This paper provides an overview of the labor market for direct care workers in the United States, including comprehensive empirical analyses of wage determination and labor supply, using panel data from the 1996 and 2001 Surveys of Income and Program Participation (SIPP). The paper describes the ways in which public policy is expected to affect the direct care labor market and empirically analyzes the wages, health insurance coverage, and employment duration of direct care workers. The authors find both that wages of direct care workers are quite low, with median starting wage of $7.96, and that spells of employment with a given employer are short, averaging just under 10 months. The authors gratefully acknowledge support from the Carsey Institute at the University of New Hampshire, the W.E. Upjohn Institute for Employment Research, and the New England Public Policy Center at the Federal Reserve Bank of Boston. Alicia Sasser, Christopher Foote, Robert Triest, Christine Bishop and other participants in the Federal Reserve Bank of Boston research seminar and the New England Study Group provided helpful suggestions. All errors are our own. NEPPC Working Paper 07-4 Baughman