Rising Home Care and Falling Wages: The Impact of the Growing Share of Home Care Workers on Direct Care Worker Wages

Objectives Over the past several decades, Medicaid's expansion of home- and community-based services (HCBS) has facilitated a shift in the direct care workforce from institutional settings to home care settings. Although this shift is well documented, less is known about its impact on the hourly wages of direct care workers. This study examines how the rising proportion of home care workers in the direct care workforce has been associated with wages of the 2 groups that constitute this workforce—home care and institutional care workers—and the overall direct care worker wages. Design An observational study using pooled data from the 2008–2012 and 2018–2022 American Community Survey. Setting and Participants The sample includes direct care workers—personal care aides, home health aides, and nursing assistants—in 50 states and Washington, DC. Methods We adopt first-difference models at the state level to analyze trends in the direct care worker composition and wages over the recent decade. Results Increases in the share of home care workers are associated with a decline in direct care worker wages but no changes in the wages of home care or institutional care workers. This decline appears to be driven by the growing share of lower-paid home care jobs. Conclusions and Implications These findings extend prior studies that have largely focused on the shift in the long-term services and supports (LTSS) toward HCBS with respect to Medicaid expenditures and worker supply, with less attention to worker compensation. By doing so, we highlight a critical policy challenge: without improving compensation for home care workers, continued rebalancing of LTSS toward home-based settings may worsen workforce shortages.