The Impact of Wages on Care Home Quality in England

Background and Objectives: In many countries, a large proportion of long-term care staff are paid at, or near, minimum wage, leading to concerns of negative effects on care outcomes. This study analysed the effect of staff wages on care home quality ratings in England.

Research Design and Methods: A national staffing database of long-term care providers was matched with local area information on needs and supply to construct a three-year panel (2016-2018) of English care home observations. Using multiple imputation methods to address missing data provided a dataset of 12,055 observations of 5,556 care facilities (both residential and nursing homes). We analysed the effect of facility-level average hourly wage of care staff on national regulator quality ratings. A measure of impact of exogenous changes in national minimum wage on care facilities was used as an instrument for wage.

Results: We find that wages positively impact on care home quality ratings. Other things equal, a 10% increase in average hourly wage of direct care workers would lead to a 7.1% increase in the likelihood that a care home will have a high quality rating. The wage effect on quality was significant when controlling for staff skill mix, i.e., share of registered nurses in nursing home staff.

Discussion and Implications: This study provides important evidence on the positive impact that staff pay can have on the quality of long-term care. Our finding has important implications about appropriate levels of pay and the funding of long-term care.