1.
Care to pay?
Meeting the challenge of paying the ‘national
living wage’ in social care
Laura Gardiner
November 2015
@resfoundation

2.
• 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

3.
• 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.
4
But of course there’s a price tag attached
£1.7
billion
£2.3
billion
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.
5
Where to find the money?

6.
6
Where to find the money?
Productivity increases
Long-term promise but
limited potential within
NLW phase-in period

7.
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.
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.
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…

10.
£1.7
billion
£2.3
billion
10
The public funding requirement to pay the
National Living Wage to care workers
£1.0
billion
£1.4
billion
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

11.
• 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

12.
65
75
85
95
105
115
125
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Index:2009/10=100
People aged >65 years
Excluding transfer from NHS
> 65yrs
+14%
Spending
-17%
Spending
-10%
Activity
-30%
?
* Authors’ estimate for activity in 2014/15 based on
trend since 2009/10

13.
Adult social care spending as a percentage of GDP*
in England, 1994/5 to 2014/15
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
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
2020-21
PercentGDP
Excluding NHS transfer
Including NHS transfer
Projection: Same annual reduction as 2009/10 - 2014/15
Projection: Same annual reduction as 2009/10 - 2014/15
*UK GDP pro rata for England (~85% UK GDP)