California lawmakers approve nation-leading $25 minimum wage for health workers

Reviewed by Danielle Ellis, B.Sc.Sep 15 2023

A sweeping agreement between labor and the health industry would gradually raise the minimum wage for hundreds of thousands of health workers in California to a nation-leading $25 an hour while ending a years-long battle over dialysis clinics.

The pact approved by state lawmakers on Thursday, the last day of this year’s legislative session, would phase in the wage increase for hospitals, nursing homes, and other medical and psychiatric services providers. The bill now heads to the governor's desk. A spokesperson for Democratic Gov. Gavin Newsom, Izzy Gordon, said the governor will evaluate the bill on the merits before his Oct. 14 deadline to act on the legislation.

SB 525 would raise the hourly minimum at large health facilities and dialysis clinics to $23 next year, $24 in 2025, and $25 in 2026. It would boost hourly wages at community clinics to at least $21 in 2024, $22 in 2026, and $25 in 2027. Other health facilities would go to at least $21 an hour in 2024, $23 in 2026, and $25 by 2028.

The agreement "now strikes an important balance between supporting workers and protecting jobs and access to care in some of our most vulnerable communities," Carmela Coyle, president and CEO of the California Hospital Association, said in a statement. "The bill creates a pathway to improving wages for our lower-wage health care workers, while also recognizing the needs of our state's most troubled hospitals."

The deal is a significant union victory during what has been dubbed a "hot labor summer," with picket lines formed by Hollywood writers and actors, hotel workers, and Los Angeles city employees. Thousands of nurses could be next. Labor also won a $20 minimum wage for California fast-food workers, a significant boost from the current statewide $15.50 minimum wage.

Union leaders say lower-income health workers such as certified nursing assistants, patient aides, and food service workers — many of them racial minorities — need the additional money to keep up. "Health care in California will be more accessible and equitable because workers and healthcare providers stood together and stood up for patient care," SEIU California Executive Director Tia Orr said of the health care deal.

The phase-in would be slower at hospitals with a high percentage of patients covered by Medicare or Medicaid, rural independent hospitals, and small county facilities. The minimum hourly wage there would go to $18 next year, then increase annually by 3.5% until it reaches $25 in 2033.

Subsequently, at all sites, the $25 minimum wage would be increased annually to keep up with inflation. However, the bill allows health care facilities to apply for a temporary pause or slower phase-in if they can show state officials that providing the required minimum wage "would raise doubts about the covered health care facility's ability to continue as a going concern."

State Sen. María Elena Durazo, the Los Angeles Democrat who introduced the bill, called her bill "a first in the nation historic investment in our healthcare workforce." The measure "is a critical step to ensuring that we are addressing our healthcare workforce shortage," she said before the bill received final passage late Thursday in the Senate.

As part of the deal, in a separate memorandum of understanding, Service Employees International Union-United Healthcare Workers West would drop its effort to impose regulations on dialysis clinics through legislation and at the ballot box. Voters defeated all three ballot initiatives, most recently last year, but the fight has cost the dialysis industry hundreds of millions of dollars.

California Dialysis Council spokesperson Jaycob Bytel said in a statement that the agreement "protects patients from the ongoing threats at the ballot and in the legislature." It bars for four years any legislation or statewide or local ballot measures by either SEIU or the dialysis industry.

The union has pushed for wage boosts in several California cities. But the agreement bars local governments from requiring higher local minimum wages for health care workers for 10 years, until 2034. Local governments could set higher local minimum wages, but they must include all workers.

The original bill cleared the Senate in May with no votes to spare amid strident opposition from employers, who said they couldn’t afford it. The California Chamber of Commerce put the proposal on its annual “job killer” list, a designation that often is enough to kill controversial legislation. The No SB 525 coalition, which included hospitals, doctors, and business and taxpayer groups, had said the bill would cost $8 billion annually, endangering services and leading to higher premiums and higher costs for state and local governments.

Republicans who opposed the bill echoed those arguments while saying the increases will harm rural health facilities. "We'll see hospitals go out of service and we will see rural health clinics for sure be severely impacted and probably go out of business," warned state Sen. Brian Dahle, a Republican who represents rural Northern California.

The bill’s opponents also included the California Nurses Association, which said it could prompt employers to lower wages for registered nurses. The association helped scuttle a push for a $25 hourly minimum wage for health workers a year ago. That earlier effort failed in part because it was tied to a delay in earthquake-safety upgrades at hospitals.

The University of California-Berkeley Labor Center projected that the increase would boost wages for more than 469,000 health workers. The center estimates it would most benefit workers of color, who make up 70% of those workers, and women, who represent about three-quarters.

The bump would help about 40% of California's health workers, earning them on average an extra $10,352 a year and reducing their reliance on Medi-Cal, saving between $181 million and $363 million in the second year of the wage increase, according to a legislative analysis. The analysis said opponents' $8 billion cost estimate is overblown because it fails to include billions in state assistance to hospitals.

This article was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.