By Steve Moran
There is a reader, it might even be fair to call this person a fan, of Senior Living Foresight that is not a fan of being public, but from time to time this person sends me some thoughtful reflections on articles we publish. Often they have the theme of “wait a minute . . . I am not sure you have that right”. They are hugely valuable insights. I am sharing this one with permission . . . with some gentle edits for readability.
“I read your article today and have some thoughts. I admire your aspiration in treating workers well. I share this goal, and we work hard to do so.
We are an organization that supports communities that already have high occupancy, and the monthly fees are already on the high side of the industry. They are a decent size and so we have scale but no room for further growth.
The employees are paid above minimum wage and at least the market wage, though typically more, for their respective positions. We benchmark constantly. Employees receive merit increases annually that are, on average, about 3%. The communities pay most of the individual employees’ health insurance, though family coverage is expensive. PTO, paid holidays, and flex holidays are included. The communities promote heavily from within and provide leadership training to assist employees in developing their careers. As people take on higher level roles they get paid more.”
Pay More Is Your Solution?
“Your comment about how the industry treats our employees seems to indicate that we should pay more. I’d love to pay more so some people wouldn’t have to have 2 jobs, but where does the money come from? These communities have decent margins and cash flow but not extravagant or even spectacular. Because of our size and where we develop, from the time we purchase a site until the time it begins to generate revenue is years. I am not complaining at all, because the returns are decent but far from spectacular.”
Easier Said Than Done . . .
“Your idea about taking a risk to pay employees more is easier to say, but much harder when you are the person taking the actual risk. Frankly, I think the market is communicating that to us — what you are advocating, to my knowledge, doesn’t exist. Everyone knows that the Baby Boomers are coming but few people, if any, seem to have figured out how to really serve them or at least serve them and pay their employees well or at the level you seem to suggest. Otherwise, the market would have delivered this product, and it would be widely accepted by residents and staff alike!
And when it comes to home care, the service that everyone favors using so that they can remain in their home, here’s the math:
- $15/hour x 10 hours/day = $150
- $150/day x 30 days/month – $4500
This assumes that a senior needs only 10 hours/day and that the agency employing them makes no money! I’ve ignored health insurance, social security payments, etc. How many seniors can afford $4500/month . . . and this is for an employee making just $15/hour. The more you increase the rate for this employee, the more expensive this becomes for the senior wanting to stay in their home.
I appreciate your aspirations, but what I’d like to see is real math and examples/results of people who are doing it. I would love to copy them! Short of this, these are hopes and don’t seem realistic to me. Please, please tell me where I’m wrong. I want to be wrong. Still, I have a responsibility to the residents we serve not to price them out of the market or raise their fees beyond an acceptable annual rate (historically <4%). And I have a responsibility to run a business that has prudent economics that allows for continual reinvestment to keep the communities fresh while generating a suitable, but not egregious, return to the owners.
As you know, I love your column. I would like to hear about organizations actually doing what you advocate.
I did respond to this reader with some additional thoughts. That being said, they were at best only things that would make things better . . . maybe. It is a topic that we continue to need to wrestle with.