Florin Vadean, Stephen Allan and Hansel Teo
In many developed countries, the Adult Social Care (ASC) sector has experienced recruitment and retention problems, and these have been worsened by the COVID-19 pandemic. Along with the lack of status, limited career progression opportunities and employment without guaranteed hours, low pay is often mentioned as one of the main reasons for the increasing number of job vacancies. With an ageing population there is expected to be growth in the demand for ASC services. This means that there is a need for evidence to help understand whether better pay could help reduce job vacancies and improve recruitment in ASC. This study is one of the first attempts to fill this evidence gap.
To provide estimates of how much ASC sector employment changes as wage increases, known in economics as wage elasticity of labour supply.
We used the Adult Social Care Workforce Data Set, the main source of information on ASC workforce in England. This provided data on over 150,000 spells of employment for direct care workers in either care homes or domiciliary care settings for the years 2016-2022. We estimated wage elasticities of labour supply using statistical analysis. We explored how care workers differed in their response to wage changes by care setting (i.e., care home and domiciliary care), age group, level of work experience, and broad geographic regions. We then used these wage elasticities to predict the effect of two potential policy interventions on ASC employment. Namely, we considered the implementation of a sector-specific minimum wage and aligning ASC wages with those of similar job roles in the NHS.
Our results showed that, keeping everything else equal, a 1% increase in wages would lead to an increase in employment of about 4%. Across care settings, we found that wage elasticities were lower for care home staff (2% increase in employment for a 1% wage increase) compared to domiciliary care (5% increase in employment for a 1% wage increase). Limitations in data quality on wages in domiciliary care settings meant that we were more confident in the estimated wage elasticity for care home staff.
We estimated the effect of policy changes to ASC wages based on the wage elasticity estimate for care home staff. We found that introducing a care sector-specific minimum wage £1 higher than the 2022 National Living Wage of £9.50 per hour would have led to a 7% to 10% increase in ASC employment. Similarly, a policy that would have paid direct care workers the same wage rate as for similar job roles in the NHS would have led to an increase in employment of between 7% to 13%. These findings assumed that wages changed only in the ASC sector, and everything else stayed the same. However, employers outside the ASC competing for the same type of workers would have likely responded to the ASC wage increase. Our estimates are, therefore, likely to be higher than would occur in real life.
Our findings show that increasing wages in the ASC sector can increase employment. It is important to note that our estimates do not account for a wage response in other sectors. Therefore, the estimates represent an upper limit of the employment response to an ASC wage increase.
