Aged-care pay rise poses challenges for taxpayers

Aged care is hard work and most people familiar with the industry would not begrudge the 15 per cent pay rise awarded to more than 330,000 “direct care” staff last week by the Fair Work Commission. For many nurses and personal care workers it amounts to an overdue, well-earned rise of about $4 an hour. In its interim ruling, the FWC left the door open to extending the rise to another 100,000 administration and support staff in the sector, such as allied health workers, cleaners and maintenance workers. It also left open the option of increasing wages further in its final decision, possibly up to the 25 per cent lift sought by unions and recommended by the Morrison government’s Royal Commission into Aged Care Quality and Safety. That inquiry found poor wages were contributing to worker shortages and high staff turnover. As National Seniors Australia chief advocate Ian Henschke said, the safety of older Australians receiving care depended on a quality workforce with sufficient workers to improve the hours of care. About 65,000 staff are leaving the industry a year.

However important for the sector, the pay hikes raise serious economic issues for taxpayers. Under the policy Labor took to the election in May, taxpayers will be paying an extra $2.1bn a year to fund the rise, with more to follow. Workers in other low-paid industries, such as childcare and disability care, will be looking on, hoping a precedent has been set for taxpayers to pick up the tab for pay rises in the community care sector. For the good of the budget bottom line, the government must avoid such a precedent. Taxpayers are not a bottomless pit.

As reported on Monday, economists expect the decision will have only a marginal effect on inflation. Although the 15 per cent pay rise is more than double the inflation rate, the Fair Work Commission found aged-care employees were ­undervalued and that significant changes to the way they worked during the past two decades justified the large pay hike. Over time, however, it will add to budgetary pressures. The Albanese government’s first budget last month showed aged care cost taxpayers $23bn last financial year. By 2025-26 it is expected to cost $34.7bn. And its cost is projected to rise by more than 6 per cent a year for the next decade. Boosting growth and the working population to fund it is vital.

As the aged-care industry has noted, the government has no alternative but to pay up if aged-care staff levels are to be maintained or increased to meet the needs of the nation’s ageing population. Labor has promised general increases in one-on-one time for nursing home residents with carers. But with the latest financial performance survey by ­accountants StewartBrown finding 67 per cent of nursing homes made an operating loss in the year to June, service providers are in no position to fund a pay rise. The analysis found residential aged-care homes losing $14.67 per bed a day on average. And that was after a hefty infusion of $10 per bed a day provided by the Morrison government.

The pay rise and the social and economic issues surrounding it are indicative of major challenges ahead as the ageing baby boomer generation reaches the stage where many will require institutional or home care. Difficult issues of user-pay will arise, especially in relation to those in a position to do so contributing more towards the costs of their care. There is room for hotel-style services such as laundry, more extensive menu choices and entertainment options in residential care facilities, funded by those able to pay. Home care, with residents remaining in their own homes for longer with support, will be increasingly important. But many potential users and their families report difficulties gaining access to the program when it is most needed due to long waiting lists and cumbersome bureaucracy. Better models and more efficient processes need to be devised.