Florin Vadean and Stephen Allan
Adult Social Care (ASC) markets in many countries have been shaped by policies designed to increase competition, with the aim to improve services, value-for-money and choice. In England, ASC services are provided by about 18,000 care providers (operating about 39,000 care establishments), with over 80 per cent of the workforce employed in the independent (for-profit and not-for-profit) sector. As local authorities commission the majority of ASC services (about 65 percent), they have the market power to pay lower care fees when faced with budget constraints. At the same time, while national minimum wage policies have increased wages of the lowest paid care staff, many care providers have struggled to increase wages of higher paid (and likely more experienced) staff to the same degree. This is likely due to the limited increase in fees received from local authorities. These aspects of the ASC sector likely affect the ability of care providers to compete for care workforce using higher wages.
The aim of this study was to add to the limited evidence on the extent of labour market competition and the factors that can explain wage differences between staff as well as pay progression in the ASC sector.
We used worker and employer data for England for 2016 to 2019 from the Adult Social Care Workforce Data Set. We used statistical analysis to identify the factors that explained wage differences between care workers. We then used these to predict pay increases for staff by years of ASC work experience and sector of employment (for-profit, not-for-profit and public). Labour market competition was then assessed in two ways. First, through differences in care worker wages within and between care providers and, second, by how responsive care workers were to leave (or stay) with a care provider based on their wage.
We found that many factors explained wages in ASC, including qualifications, experience, and job role. We further found that higher care fees being paid by local authorities led to higher wages for care workers. However, an important part of the difference in wages between ASC sectors could not be explained: wages were about 20 per cent lower in the private, and 15 per cent lower in the voluntary, compared to the public sector. This difference was identified to be mainly due to the lack of rewards to work experience for care workers employed by independent sector providers.
In terms of labour market competition, we found comparatively smaller differences in pay between care workers employed by the same care provider, and larger differences in pay rates between care providers. The variation in wages between providers could not be explained by differences in staff skills and experience. This is not compatible with what would be expected in competitive labour markets. Finally, we found that care workers were only moderately responsive to wage changes, suggesting that care providers have some market power in setting wages.
Our findings provide evidence that, despite the large number of independent care providers in the English ASC sector, wages and labour market competition is restricted. This could be explained by the market power of local authorities in the market for ASC services.
Florin Vadean, F.Vadean@kent.ac.uk
