Responding to the Needs of Low-Wage Workers
I’m not entirely certain when I first became aware of the disparity in benefits between low-income and higher-wage employees. When I left graduate school one step removed from a doctoral degree to take a unique position with the first subsidiary of the U.S. Olympic training program, I could easily argue that I traded a lot of education for a poor salary. All my colleagues did the same. We saw opportunity, not dollar signs.
Our low compensation (I made twice as much money doing temp work as a “word processing specialist”) was offset, however, by a cornucopia of benefits, including fully paid health, life and dental insurance, 35 days of paid time-off and 10.4 days of extended PTO for illnesses lasting longer than seven days (which was used to make up the difference between state-mandated disability benefits and our full salary), education benefits and job flexibility were also part of the package. We received these perks because we were categorized as professional staff.
Most of us were young and had little to no responsibilities other than ourselves, so we found ways to make our salaries work in exchange for great experience. After approximately seven years and a range of internal promotions, we each headed toward new opportunities and employers. While the salaries were more reflective of our education and experience, we quickly began to understand the value of the rich employee benefits we left behind. Contributing to the cost of benefits, reduced time off and little job flexibility were the norm at each of our new companies.
In my case, I became the director of a division of a rehabilitation hospital. For the first time, my staff included employees who were low-wage, hourly workers. I recall being taken aback by the disparity in benefits between these individuals and my professional team. I quietly enhanced their benefits by providing opportunities for job flexibility, so they could attend things such as appointments with their healthcare providers and parent activities at their children’s schools without tapping into their 10 days of PTO (as compared with the 30 days available to other members of the division). It made them feel appreciated and our team’s productivity and performance were often ranked as the highest within the healthcare system.
Once I entered the for-profit sector, I was back to an all-exempt team (including my staff assistant)—so I didn’t think about employee-benefits disparities very much.
Then, in 2004, Netflix replaced its vacation policy for exempt employees with an unlimited PTO model. The company’s belief in “growing employee freedom” drove this change. The little-known fact at the time was that this approach to paid leave was only available to salaried employees from the “streaming” division.
It wasn’t until Netflix released its generous parental-leave policy for salaried employees in August 2015, however, that the disparity related to paid time off between exempt and hourly workers became widely understood. After a spate of negative reviews, Netflix updated its policy to include its DVD-distribution and call-center workers—albeit with four months of paid parental leave for its hourly workers and 14 weeks of leave available for its call-center workers (versus up to one year for its salaried streaming employees).
“The way that we think about leave benefits and offerings is in line with how we think about comp,” Tawni Cranz, Netflix’s chief talent officer, told Talent Management. “So when we think about compensation, we think about what is the market pay, what is going to be market competitive, and then also what is caring and compassionate for our employees, and what will they value?”
Honestly, Cranz’s comments make complete sense. But there is still something that nags at many people involved in employee benefits about the growing public awareness of the challenges facing low-income employees.
In prior columns on the topics of workplace-flexibility policies and paid leave, I noted the differences between the lowest- and highest-paid 10 percent of employees in private industry for sick leave, vacation time and holidays.
While, on average, 64 percent, 76 percent and 77 percent of all employees receive paid sick, vacation and holiday leave, respectively, according to the Bureau of Labor Statistics, workers in the lowest 10 percent bracket fall well below the average for paid leave (27 percent sick time, 41 percent vacation and 40 percent holidays). With the emphasis that executives have placed on health and wellness, it seems the lack of access to PTO makes it more challenging for low-wage workers to fully participate.
I turned to a long-time colleague, Bruce Sherman, medical director for population health management for Conduent HR Services (formerly Xerox) and chief medical officer for the National Alliance of Healthcare Purchaser Coalitions, to help me vet out some of these issues. As a physician with years of experience in employee-health programs, Sherman long ago took up the mantle of low-paid workers.
Harnett: How did you become interested in the challenges facing low-income workers?
Sherman: In my efforts with colleagues internal and external to Conduent to better understand increasing workforce-healthcare expenditures, we broadened our approach to consider social determinants of health as potential influencers of healthcare-utilization patterns. We did this because the existing clinical-only approaches to health management hadn’t yielded the desired outcomes.
Given limited available data regarding employee social determinants of health, we chose wage as a proxy to use in our research. In a rigorously designed analysis, we were surprised to find striking differences in healthcare utilization and cost patterns by wage band. This led us to rethink our approach to health benefits for this group, which comprises about 40 percent of the U.S. workforce.
Harnett: I find it surprising that others hadn’t considered looking at wage bands before. What did you find regarding some of the biggest obstacles for this population in the workplace?
Sherman: Perhaps the greatest issue for the low-wage-worker population is that they have a higher prevalence of unhealthy lifestyle behaviors and chronic illnesses—including behavioral health—than their more highly paid counterparts. As a result, they are most likely to benefit from ongoing access to affordable healthcare services.
A second challenge for this population is access to healthcare, especially for hourly workers. Our research demonstrated that low-income employees use about half the preventive services than higher-earning colleagues. One of the drivers for this is that the low-wage workers are penalized if they leave work to seek healthcare. Employers can help address this problem by giving employees a “health day,” which is a paid half-day off that employees can use for preventive-healthcare services.
Harnett: The approach you describe is not unlike how I used to give my hourly employees flex time to take care of things like physician visits. What other ways can employers help these employees?
Sherman: One of the best ways for employers to help this population is to listen and understand the group’s priorities and needs. We’re all well-intentioned, but sometimes we think we know what’s best for others. That may not always be the case.
Another option for employers that provide telehealth services is to cover the cost of the initial use of that offering for low-wage employees, so they have a risk-free experience at accessing a lower-cost treatment setting.
Finally, employers can lower health-plan deductibles for this group (net of employer contributions to HRA and HSAs).
Harnett: Those are all practical suggestions. How can we improve how we structure benefits for low-wage employees?
Sherman: Make healthcare more affordable and accessible. Using wage-based approaches to benefit-design subsidies can help this group significantly. That said, we still don’t know what the best way is to achieve this goal. Many employers have adopted wage-based premiums, but if deductibles remain high, concern regarding out-of-pocket costs can be a significant deterrent to accessing care. The truth is that we don’t know how to most cost-effectively make healthcare more affordable for low-wage workers, and research is underway to address this issue. Employers can also consider wage-based HRA or HSA contributions to effectively lower the net deductible.
Harnett: What can low-income workers teach us?
Sherman: That’s a great question, Carol! We can’t assume that what’s important to us is important to them. They may have more foundational and immediate priorities—such as financial stress—that may impact their view of the world, including workplace performance and job-security concerns.
For those living paycheck to paycheck, it’s vital that we appreciate the importance of predictable income for these individuals. Just-in-time work scheduling creates uncertainty and stress. People earning close to a minimum wage may make them seem expendable from a business standpoint, but from organizational culture, corporate social responsibility and humanitarian perspectives, it only makes sense to acknowledge the importance of this issue for them.
Finally, don’t confuse reduced healthcare costs for improved health outcomes. Our research demonstrated that many low-income individuals don’t access care because of cost or other barriers—so healthcare-cost trends may not be a reliable indicator of health status. In fact, we’re seeing that low-income workers are significantly more likely to be users of high-intensity healthcare services, like hospitalizations and emergency-department visits.
As I reflect on Sherman’s insights and the myriad issues and challenges associated with low-wage workers, I think the first step is to reconsider how we structure their access to workplace flexibility, paid leave and healthcare-benefits design. These benefits don’t have to be equal to higher-paid employees, but they should help them be more successful in managing the demands of their lives and their health.