By Midnightblueowl (Own work) [CC0], via Wikimedia Commons
August 30, 2016; Guardian

The alarms raised by nonprofits in the UK about the potentially disastrous impact of the new national living wage have come to naught, as recent research by the Resolution Foundation shows a positive effect on the traditionally low-wage sector. We might suggest that U.S. direct care nonprofits would do well to take heed.

Care England, the nonprofit umbrella body for the bigger companies in the sector, predicted in April, as a living wage was due to take effect for direct care workers over the age of 25, that the added cost would be the “the final straw” for organizations struggling with their margins. However, as it turns out…

The study, based on pay data for 80,000 employees of more than 2,000 care providers, suggests that 57 percent of frontline workers (54 percent of all) have benefited directly from the £7.20 [$9.60] minimum with an average pay rise of 9.2 percent. This includes 83 percent of those under the age of 25 who are now receiving £7.20 or more, even though it is not required by law.

The money devoted to pay in this subsector, the report finds, has risen by 6.9 percent—more than twice that needed to meet the new minimum. The authors conclude that introduction of the national living wage is “undoubtedly correlated with an immediate and profound increase in pay in the sector.”

Laura Gardiner, senior research and policy analyst at the foundation, said, “It is great news that the national living wage has had a large, positive impact on low pay in social care, giving hundreds of thousands of frontline care workers a pay rise, with no evidence of hours being cut to foot the bill.”

The study did, however, express concern about workers’ opportunities for advancement, since 32 percent of the sample studied were now “bunched” at £7.20.

A previous study found that 82 percent of local councils that paid for direct care raised fees paid to care providers as the regulation took effect.

David Brindle, writing for the Guardian, wonders at the fact that the sector was able to manage the pay increases despite crying wolf. After making some guesses about why the outcomes were not as extreme as had been forecasted, he ended his article by writing:

More than ever, the sector needs to get its act together to campaign effectively for a sustainable, long-term funding settlement. A key plank of such a campaign must be transparency and honesty by care providers about costs—and profits.

What has happened with the “national living wage” will leave some people feeling that providers were crying wolf about the consequences. If that suspicion is allowed to fester, the public will not rally to social care’s flag.”

We might suggest that this situation is worth an examination by direct care nonprofits in the United States, which have been portending the same kind of disaster if nonprofits were to take the radical road of paying frontline workers a living wage.—Ruth McCambridge