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This One Labor Statistic Should Scare You

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By Steve Moran

I was at a recent conference where Beth Mace, the Economist for NIC, was one of the presenters. Her slide deck contained this one slide that is very scary.

 

 

It Needs Some Explanation

The chart looks at 4 pieces of data from 2007 to present day 2016:

  • Quarter by quarter changes in “Assisted Living Asking Rents,” which are not the same as actual rents. While NIC is very aggressively working on collecting real rents, they don’t yet have enough data to be meaningful. We do know for sure that to a greater or lessor degree asking rents are higher than real rents.

  • Quarter by quarter changes in “Independent Living Asking Rents,” which again are not the same as real rents and, with absolute certainty, are lower.

  • Quarter by quarter changes in the average hourly employee costs in the private sector.

  • Quarter by quarter changes in the average hourly assisted living employee costs.

The Scary Numbers

Right now, today . . . assisted living “ASKING RENTS” are increasing at a bit over 2% and we are seeing essentially no improvement in occupancy rates. While it is a little better for independent living, it is not by much.

At the same time . . . assisted living labor costs are going up by 4% per year.

You might argue that this is not as bad as it sounds because labor is only a portion of total expenses, and while true, it is a big portion. It is also likely that labor costs are not the only costs that are increasing each year. At some point, likely in the near future, rent increases will not be able to keep up with increases in labor costs . . . and that is a big problem.

It is likely to get worse for at least three reasons:

  1. As we add inventory there will be more poaching of great leaders who will in turn poach managers who will then poach line staff. Each time that happens costs go up more.

  2. Aging Americans will need more caregivers, creating a scarcity which will drive up costs.

  3. More and more states, cities and counties are adopting $15 an hour minimum wage laws and those wage increases will cascade to higher paid employees.

Now You Have Depressed Me . . .

This is a train that can’t be stopped but there are certain things that can be done to minimize the impact:

  1. We have to figure out how to make team members, love coming to work each day. I started to write “particularly line staff” but then realized that was not quite right. We need to figure out how to make managers and executive directors love coming to work each day. When they do, their team members will also love coming to work.

  1. We must . . . we must . . . we must do something about how we market and sell our product. We are in competition with home and we are too often shooting ourselves in the foot.   

    We don’t follow up on internet leads as soon as we get them, though the statistics are clear -- rapid follow-up results in more move-ins. Caring.com, a Senior Housing Forum partner, has the statistics to prove it.

    We work really hard to contract with frail, immediate-need residents and all but ignore those folks who “are not quite ready to move”. When we spend the extra time and make friends with those people, they will move earlier and stay longer. David Smith of Sherpa, a Senior Housing Forum partner, has the data to prove it.

Finally, the Argentum certification initiative will -- over time -- make working in senior living more attractive and, in turn, attract more people to the very best industry in the whole wide world. 

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