Labor Costs for Direct Care Workers
This document explains a methodology to provide greater insight into labor costs for direct care workers. This approach was developed by the U.S. Department of Labor’s Chief Economist for discussion purposes and is based entirely on easily accessible, publicly available data from the Bureau of Labor Statistics.
Wages, total compensation, and job openings were considered for two direct care occupations: home health aides and personal care aides. Wages, compensation, and job openings were also considered for eight alternative occupations that have similar requirements for entry to those of direct care occupations. These eight alternative occupations comprise a core set of occupations, apart from direct care, that potential direct care workers might go into. Employers who have job openings in these occupations are “competing” with employers of home health aides and personal care aides for workers.
The eight alternative occupations were selected based on information available in the Occupational Outlook Handbook from the Bureau of Labor Statistics (BLS). Like direct care work, these eight alternative occupations require no formal educational credential for entry, require only short-term on the job training, had median pay in 2015 less than $25,000, and are projected to see at least 50,000 new jobs over the next decade. The occupations that met this criteria were: retail salespersons; cashiers; combined food preparation and serving workers, including fast food; waiters and waitresses; janitors and cleaners, except maids and housekeeping cleaners; stock clerks and order fillers; maids and housekeeping cleaners; and food preparation workers.
First, average hourly wages of workers in direct care occupations were compared to those in the alternative occupations, using May 2015 data by state from the Occupational Employment Statistics (OES) Program at BLS. These comparisons can be found in Table 1. Note, for easy comparison, an average wage is also included for the eight alternative occupations (the average wage is a weighted average based on employment in those eight occupations).
Next, total compensation of workers in direct care occupations was compared to those in the alternative occupations. These comparisons can be found in Table 2. To estimate total compensation, average hourly wages were adjusted to account for the fact that wages make up only a portion of total compensation. Using BLS Employer Costs for Employee Compensation data, wages were found to represent 71.1% of total compensation among civilian workers in service occupations in 2015Q2 (see page 21). Thus, wages were multiplied by (1/0.711) to find total compensation.
The final benchmark is annual job openings, which can be found in Table 3. Long-term (2014-2024) state employment projections data were used to determine the average annual job openings for each occupation. Projected job openings in the eight alternative occupations were summed to calculate a ratio of projected openings in alternative occupations to openings in direct care occupations. This ratio provides a sense of the level of competition for workers that employers of direct care workers face. In all states, there are many times the number of projected job openings in just these eight alternative occupations than in direct care occupations.
As another metric, projected job openings were summed in just the alternative occupations with higher wages than in both direct care occupations, calculating a ratio of projected job openings in higher wage alternative occupations to openings in direct care occupations. Even when restricting to the subset of these eight alternative occupations that have higher wages than both home health aides and personal care aides, in most states there are still multiple times the number of job openings in alternative occupations than in direct care occupations. This means that potential direct care workers will typically have higher-paying alternatives available to them, which will affect hiring and retention in direct care occupations.