The Rapidly Growing Home Care Sector and Labor Force Participation
Authors:   Federal Reserve Bank of San Francisco, Stepick Lina , Tran Brooke Ada ,   Stanford University
Published: March 2022

The COVID-19 pandemic has shed light on the growing need for home care workers, who support their elderly and disabled clients in their homes with activities of daily living, and on the challenges of recruiting and retaining workers in the industry. This brief describes the state of the home care sector and its connection to the economy. It looks at home care as a rapidly growing industry facing significant challenges and at home care’s role in enabling working-aged family members to participate in the labor force,i which supports the Federal Reserve’s maximum employment mandate There is an expanding need for home care in the United States, as the proportion of the population aged 65 and over rises.ii Home care is projected to add the largest number of jobs of any occupation over the next 10 years.iii At the same time, home care workers earn low wages and face challenging working conditions, factors that may be contributing to high turnover in the industryiv and a rising home care worker shortage.v Although low wages pose challenges to home care worker recruitment and retention, long-term care is unaffordable for many families. Medicaid pays for the majority of home care costs in the United States; however, many states have Medicaid waitlists for long-term care, and Medicaid eligibility requires individuals to have limited assets or to spend down the countable assets they have.vi To fill the long-term care affordability gap, many family members—disproportionately women—provide unpaid care, often reducing work hours or dropping out of the labor force entirely.vii Studies estimating the economic impacts of increased public funding for home care find that such investments have economic implications, such as reductions in worker turnover and in reliance on social safety net programs, increases in tax revenues and consumer spending due to wage increases, and higher salaries of those who would otherwise reduce their work hours or drop out of the labor force to provide unpaid family care.viii Improving home care worker wages, benefits, and working conditions and expanding access to subsidized home care has significant equity implications as well. The home care workforce is composed disproportionately of women of color and immigrant women.ix Unpaid family caregivers are also disproportionately women, many of whom reduce their own work hours or leave the labor force when they lack sufficient access to affordable, professional home care.x In 2020, many states used pandemic subsidies to expand eligibility for Medicaid-funded home care services and to give home care workers retainer payments.xi However, with those subsidies expiring, industry researchers have noted that many home care agencies have reduced the worker recruitment and retention incentives they offered in 2020; thus, low wages persist, and worker turnover rates remain high.xii Improving pay, recruitment, and retention in this rapidly growing and disproportionately women of color workforce could not only support this sector, but also enable labor force participation and contribute to a more equitable economy.xiii