Aged care workers’ ‘historic’ wage boost to cost $11.3 billion
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Published May 3, 2023
Sydney Morning Herald, 3 May 2023
A long-awaited pay rise for aged care workers will cost the federal budget more than $11 billion as Labor hopes to entice more registered nurses to the hemorrhaging sector with $10,000 pay boosts.
The government has revealed the bill for its election promise to fund a wage rise for 250,000 beleaguered aged care staff comes to $11.3 billion over four years to cover the 15 per cent increase decided by the Fair Work Commission last year.
The pay rise will be passed on in full from July after the government lost a bid to stagger it across two financial years, and will mean that a registered nurse on level 2.3 of their industry award will have their pay packets increased by more than $10,000 to $78,165.36.
Personal care staff on level 4 of their award will also receive a $7300 yearly top-up, amounting to an additional $141 a week in what Aged Care Minister Anika Wells described as a “historic and deserved pay rise for a workforce undervalued for far too long”.
“This wage decision will help more women and families to make ends meet, and ensure that quality aged care workers are less likely to contemplate leaving the sector because of pay concerns,” Wells said.
The Health Services Union called for a 25 per cent pay rise, comparable to $5 an hour, for aged care workers and nurses after a royal commission into the sector called on the Commonwealth and providers to overhaul the historical underpayment of the feminised workforce.
Fair Work in November awarded an interim 15 per cent increase, partly due to the historic, gender-based undervaluation of care work in Australia, and didn’t discount the possibility of a further rise. The government initially proposed funding 10 per cent of the pay rise from July and 5 per cent from July 1, 2024, but the commission decided the full increase should be granted in July.
Treasury modelling accompanying Labor’s Fair Work submission last year backing a pay rise found a 25 per cent increase to wages could increase labour supply by between 5 and 10 per cent. However, it warned at the time such an increase in wages could further push up inflation if it prompted workers in other sectors to seek similarly large pay rises.
On Tuesday, following the RBA’s decision to raise the official cash rate to 3.85 per cent to lower inflation, Reserve Bank governor Dr Philip Lowe said wage growth was in line with the bank’s inflation target range, but the board remained alert to the risk of continued high inflation contributing to a possible price-wage spiral.
Treasurer Jim Chalmers said the funding would deliver “a fair day’s pay for a fair day’s work” for thousands of aged care staff nationwide but has previously acknowledged the decision would add pressure to the May budget. He released figures last month that showed aged care costs had blown out by $5 billion to $26.9 billion this financial year.
The bill will balloon to $35.8 billion in 2025-26 – a 21 per cent increase over the next three years, making it the government’s fifth-largest area of expenditure next to debt, the NDIS, health care and defence.
The government doesn’t directly fund the incomes of aged care workers, but rather subsidises the sector, with the amount per bed per day increasing by $26.30 to $243.10. Providers recently pledged to pass on the 15 per cent pay rise in full.
“Aged care workers have been doing it tough, with severe staff shortages during a pandemic,” Aged and Community Care Providers Association head Tom Symondson said recently.
“On top of this, workers across the nation have been feeling the squeeze over this past year as a result of rising inflation, higher interest rates and a general increase in the cost of living.”
The government hopes the wage boost will increase retention after Health Department documents published in March showed its pledge of around-the-clock nursing in facilities, and mandated time spent caring for each nursing home resident, would create a shortfall of about 25,000 workers in two years’ time.
With workforce shortages contributing to closures, providers citing tens of thousands of job vacancies nationwide, the government is also turning to migration to plug the shortfall.
Home Affairs Minister Clare O’Neil last week, when announcing changes to the migration program, conceded the crisis couldn’t be solved by the domestic population alone.
However, one of the announced changes was to cap the work rights of international students to 48 hours a week, which aged care providers said would devastate the already strained sector.
The government is also boosting access to education and training programs to help relieve workforce pressures.