Can we afford to care?

Care to pay?Meeting the challenge of paying the ‘national living wage’ in social care

Laura Gardiner

November 2015

@resfoundation

• A £30 billion industry, in which demand for services is set to rise by as much as 60 per cent in the next two decades…

• …But expenditure has been falling since 2010, reflecting sharp cuts to local authority budgets

• At the heart of this conundrum sits the UK’s 1.4 million frontline care workers, who face:– Low (sometimes illegal) wages– Poor working conditions– Little training– Few employee benefits

• A growing consensus that if we want a social care system that can meet the needs of our ageing population, we need to invest better in the workers who provide it

2

The adult social care workforce plays a vital role in society, but faces substantial challenges

• Between 51 and 64 per cent of the UK’s frontline workforce will be directly affected by 2020 = a pay rise for 850,000–1 million workers

• And a big one!– Annual wage rise of £1,250 for those affected– Net household income increase of £825 after

taxes and benefits accounted for• Other recent developments may provide a

further boost to care worker terms and conditions (apprenticeship levy, EU ruling on home-to-work travel)

3

The National Living Wage is very welcome, directly affecting up to 1 million care workers

4

But of course there’s a price tag attached

£1.7 billion

£2.3billion

Pre-existing payroll costs associated with above-

inflation increases in the National Minimum

Wage

Additional costs associated with

paying the National Living Wage to over-24s

5

Where to find the money?

6

Where to find the money?

Productivity increases

Long-term promise but limited potential within NLW phase-in period

7

Where to find the money?

Productivity increases ‘Trimming’ other costs or profits

Long-term promise but limited potential within NLW phase-in period

Limited given sector has already sought ways to ‘cut

the fat’ in recent years. Further wage compression or

minimum wage non-compliance deeply

undesirable

8

Where to find the money?

Productivity increases ‘Trimming’ other costs or profits

‘Rationing’ services

Long-term promise but limited potential within NLW phase-in period

Limited given sector has already sought ways to ‘cut

the fat’ in recent years. Further wage compression or

minimum wage non-compliance deeply

undesirable

For example via further shortening of visits or tightening of eligibility criteria. Undesirable

9

Where to find the money?

Productivity increases ‘Trimming’ other costs or profits

‘Rationing’ services Increasing publicly funding

Long-term promise but limited potential within NLW phase-in period

Limited given sector has already sought ways to ‘cut

the fat’ in recent years. Further wage compression or

minimum wage non-compliance deeply

undesirable

For example via further shortening of visits or tightening of eligibility criteria. Undesirable

Appears the most viable option…

£1.7 billion

£2.3billion

10

The public funding requirement to pay the National Living Wage to care workers

£1.0 billio

n

£1.4billion

Pre-existing payroll costs associated with above-

inflation increases in the National Minimum

Wage

Additional costs associated with

paying the National Living Wage to over-24s

• As well as considering the wider context for social care resourcing to ensure demand is met in the long term, a need to specifically address the cost of rising wage floors

• No easy task in the context of £20 billion further cuts through to the end of the parliament. But an opportunity to think about the balance of support for different groups

• And finding the money just the first step. Need to ensure funding reaches workers pockets, and not lose sight of broader goals of improving working conditions and training and progression opportunities across the sector

11

Imperative that the upcoming Spending Review sets out funding provisions

2009-10 2010-11 2011-12 2012-13 2013-14 2014-1565

75

85

95

105

115

125

People aged >65 yearsExcluding transfer from NHSIncluding transfer from NHSPeople >65 yrs receiving services

Inde

x: 2

009/

10 =

100

> 65yrs+14%

Spending-17%

Spending-10%

Activity-30%

?

* Authors’ estimate for activity in 2014/15 based on trend since 2009/10

Adult social care spending as a percentage of GDP* in England, 1994/5 to 2014/15

1994-95

1995-96

1996-97

1997-98

1998-99

1999-20

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

2018-19

2019-20

2020-210.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

Excluding NHS transfer

Including NHS transfer

Projection: Same annual reduction as 2009/10 - 2014/15

Projection: Same annual reduction as 2009/10 - 2014/15

Perc

ent G

DP

*UK GDP pro rata for England (~85% UK GDP)