National Living Wage and care homes: How do we value care workers and ensure high-quality care?

The National Living Wage is good news for low-paid care home workers, but it must be properly funded, says Claire Turner.

The National Living Wage (NLW) is good news for those working in care homes. Care home workers are almost universally low paid. They do an important and challenging job and increasing wages is one way to recognise their contribution. Ahead of the Comprehensive Spending Review, JRF-funded research out today shows that introducing the NLW for low-paid care home workers will cost £387 million per year. This cost, comprising wage increases, National Insurance and pension contributions, will need to be met by care providers and government. Half of all care home workers (approximately 300,000 people) will benefit from the NLW and they will get an average of £462 more per year.

Care homes that have mostly self-funded residents should be able to meet their share of the cost under their current funding arrangements. However, care homes with a significant number of residents with local authority-funded places are likely to struggle. The squeeze on local authority budgets means that many councils are already failing to meet the full cost of a residential care place – on average 10 per cent less than the true cost.

In a system already under financial pressure, something has got to give and the risk is that this will be the quality of care. The lack of adequate funding for local authority-funded care home places could mean that higher-quality care is only available to those who can pay for it.

The research looked at a range of options for funding the NLW within care homes. With the continued squeeze on local authority budgets, it will be difficult to meet the cost within current funding arrangements. Raising fees is not a solution either. Many self-funders already subsidise the cost of local authority places and it would be wrong to assume that all self-funders are wealthy and could afford higher fees.

The most compelling argument is that central government should provide extra funding to fill the gap between the price currently paid for care by local authorities and the cost of higher wage increases. The government will see a £46 million per year increase in income tax receipts (plus extra savings from a lower benefits bill) from paying the NLW. More importantly, this is about all of us and the care we receive as we get older. Social care needs to move from an underfunded and undervalued service to a sector of primary national strategic importance to recognise its contribution to our society and economy. Supporting higher wages, while retaining the quality of care, is an important piece of the jigsaw.