Even as unemployment levels remain unacceptably high, states have cut back on badly needed social service jobs in response to massive budget shortfalls. The federal government should step in to help states preserve, rather than cut back, social care services. Our Dignity Voucher program would create jobs in an eldercare industry with expanding unmet demand and shore up gaps in services created by state budget cuts.
Since the start of the Great Recession, states have faced declining revenues and increased demand for services, leading to the largest budget shortfalls on record. For fiscal year 2010, states were forced to close a gap of $192 billion – almost 30 percent of total state budgets – through service cuts and higher taxes. They now face shortfalls of around 20 percent for both 2011 and 2012. Some states have had to cut over 50 percent of their budgets to meet balanced budget requirements.
At least 25 states and the District of Colombia have responded to these shortfalls by cutting care services, which can range from in-home medical care performed by trained home health aides to basic assistance with cooking and cleaning from personal and home care aides. More cuts will come as states seek to close next year’s gaps and federal recovery funds dry up. For example, Oregon, which has had comparatively average-level shortfalls of 32.4 percent for 2010 and a projected 17.6 percent gap for its next budget cycle in 2012, has eliminated home health aid services for 4,500 residents and is planning cuts for another 10,500 service recipients in October of this year.
These cuts will cost states more in the long run, as home care allows people to live independently longer, and hospitalization and institutional care are both significantly more expensive than home care. Additionally, home-based care relieves pressure on the 67.5 million American family caregivers. Family caregivers cost U.S. employers an incredible $33.6 billion per year in lost productivity due to caregiving duties, and an additional $13.4 billion in increased health care expenses compared to non-caregiving employees.
The cuts will also cost jobs directly. States and local governments are expected to cut up to 900,000 jobs in 2011 and an additional 500,000 by the end of the following year.
A significant portion of these layoffs are low-skill jobs, and these cuts will worsen the already dismal unemployment figures for workers with low education levels. Compared to a national unemployment rate of around 10 percent over the past calendar year, unemployment rates for workers with less than a high school diploma have hovered around 15 percent.
This trend is projected to continue beyond the Great Recession. According to the Bureau of Labor Statistics, of the 30 occupations with the largest employment declines from 2008-18, more than 90 percent are low-skill jobs.
Fortunately, there is a bright spot in this picture. Aging baby boomers will push the size of the over-60 population to 25 percent of total population by 2050, so demand in the home health care and social assistance sectors will soar. Indeed, home health aides and personal and home care aides are two of the five fastest-growing occupations in the U.S., projected to add at least 837,000 jobs by 2018, though that's still short of the demand. With short-term, on-the-job training, low-skill workers can be quickly hired and retrained for these positions, which earn a median of about $20,000 per year.
To match unemployed service-sector workers with unmet needs for care services, we have proposed the Dignity Voucher program, an innovative approach to consumer-directed eldercare vouchers. The program would boost low-skill employment by subsidizing the cost of non-medical care for the elderly and boost tax revenues by formalizing the grey caregiving market.
Here is how the program would work. Qualified retirees would be eligible to purchase eldercare services, such as cooking, cleaning and transportation, at less than the minimum wage for a certain number of hours per week. A certified employer would ensure that the applicants were eligible (making applications for them, if necessary) and provide the services. The care recipient would then pay the employer at the reduced rate, and the employer would apply for reimbursement from the government for the difference between what the retiree pays and what the employer pays, or at a rate set by Congress. Because the program is consumer-directed, only competitive and customer-friendly service providers will survive.
Boosting low-skill employment can help our economy get back on track; putting money into the pockets of low-income workers will immediately increase aggregate consumer demand, as low earners are more likely to spend their income than higher earners.
By itself, providing the elderly with Dignity Vouchers cannot reduce unemployment to tolerable levels. But it can be an important part of a strategy for restoring American economic growth. As states cut services and jobs in response to unprecedented budget shortfalls and unemployment levels remain unacceptably high, Congress should consider a Dignity Voucher program that can unite older Americans who need care with hard-working Americans who need jobs.
Michael Lind is the Policy Director of the Economic Growth Program at the New America Foundation and Lauren Damme is a Policy Analyst in the Next Social Contract Initiative.
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