Procurement

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A Long Overdue Investment in Racial Justice: Raising Wages for Care Workers

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Betsy Ohrn

By Betsy Ohrn Director of Research

At the Center for Economic Inclusion, we believe all workers should earn a family sustaining wage.

One racial equity priority that we were excited to see reflected in Governor Walz’s proposed budget is a major investment to increase the wages of direct care workers. The budget includes $300 million in this biennium and $500 million in the next to implement the tentative contract agreement between the State of Minnesota and SEIU Healthcare Minnesota and Iowa, providing a historic rate increase for more than 20,000 home care workers in Minnesota.  This is a critical opportunity to address a deep racial injustice that touches the lives of hundreds of thousands of Minnesotans. 

“As a woman of color who has chosen to make Homecare a career choice I cannot express how discouraging it is to find an occupation that you truly love and are made for, which also benefits the people you provide services to, but find that you can’t earn enough at to financially support your own household without some type of assistance or additional employment.”- Tavona Johnson 

Women make up 85% of the direct care workforce, 36% of these workers are people of color. Based on DEED data, almost 11% of working Black Minnesotans work as direct care workers (personal care workers, or nursing/home health aides.) This follows a national trend which also shows that Black women are deeply overrepresented in direct care occupations. This occupational segregation reflects a legacy of slavery and domestic servanthood that continues today. Where enslaved Black women were once charged with caring for White children, Black women were then sidelined into work as domestic servants and childcare workers, and now increasingly they are called to care for the growing elderly population. 

The injustice is not the work itself, but the fact that the work continues to be deeply underpaid, even though this work is essential to the well-being of hundreds of thousands of Minnesotans. In 2020, the average wage for all direct care workers in Minnesota was $14.72 per hour. Around 40% of direct care workers have insurance through Medicaid, Medicare, or another public source.1  

Further, these professions are critical to the future of Minnesota, especially as our population continues to age. Direct Care Workers, nursing assistants and personal care assistants, are two of the fastest growing professions in Minnesota. However, low wages and challenging working conditions are already resulting in large vacancy rates. According to the Minnesota Department of Employment and Economic Development, the last estimate at the end of 2021 showed more than 9,100 job openings — a vacancy rate of 8.4%. In 2022, Minnesota nursing homes reported the largest staffing shortages in the country. These staffing shortages make the work harder for the remaining care workers, place extreme stress on family members, and are creating burdens on our hospital system.  Having committed, well-trained, and experienced workers in these roles is critical to the dignity and well-being of Minnesotans needing care.  

While some employers may want to raise wages, market failures and policy hold back what is possible. Federal Medicaid and Medicare rules constrain how much states can reimburse for direct care services. For this reason, state level leadership is critical to this issue. The agreement between SEIU Healthcare and the State of Minnesota would increase starting wages from $15.25 to $20 per hour by 2025. The deal covers more than 20,000 caregivers, about a fifth of the total direct care workers across the state. If the legislature approves and funds this contract, it will be a significant step forward for many direct care workers.  

This is a historic investment in the wages of workers who are essential to Minnesota’s economy. Not only does this benefit our homecare workers, it also goes a long way to attract committed people to these important jobs. However, you do not need to be a member of SEIU to show your support.  

  • Want to know more about how we do our research? Check out our Indicators for an Inclusive Regional Economy

  • Take Action: Find and call your legislator. Let them know you support this opportunity to make a difference in the lives of our workers and of all Minnesotans that need dedicated people caring for them. 

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Previewing the Racial Equity Dividends Index for the Public Sector

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Nathan Arnosti

By Nathan Arnosti, Director of Analytics

Racial Equity: The New Public Priority

Forward-thinking leaders in local governments across the country recognize that many existing practices and policies stand in the way of goals to build racially equitable, inclusive, and prosperous communities.

Studies show that status quo practices – outdated job requirements that exclude candidates of color, purchasing agreements with longstanding contractors that hinder their ability to diversify their supply chains and increase regional job growth among Black, Indigenous, Hispanic, and Asian entrepreneurs,  land use planning that fails to integrate the needs and perspectives of historically marginalized communities, economic development incentives that subsidize low-wage job creation –exacerbate racial wealth gaps and restrict regional economic growth.

​​​​​​​Meanwhile, emerging practices based on research and pilot demonstrations in local governments across the country offer paths to improved service delivery, community relations, livability, and shared economic prosperity.

Many local governments have established taskforces and committees, created new permanent roles and teams, and joined peer learning networks to make progress towards becoming more racially equitable and inclusive. Yet these efforts are too often piecemeal, siloed within specific departments, and lacking broader context and peer comparison. Based on conversations we’ve had with public sector leaders and partners in recent months, we believe that those looking to take their next steps towards building racially equitable governments would benefit from a new tool developed by the Center for Economic Inclusion, the Racial Equity Dividends Index for the Public Sector.

What Gets Measured, Gets Done

This analytical tool evaluates a local government’s internal and external-facing practices across ten dimensions, including Procurement, Community and Economic Development, and Budgets, identifying more than 60 racial equity standards that research and experience affirm to support more racially equitable and inclusive outcomes. Participating organizations receive a customized score report that provides a clear, concise, quantified picture of their government’s overall current state for supporting racial equity, benchmarks progress against peers, and identifies opportunities for further progress. High-scoring entities will also be publicly recognized in an annual Racial Equity Dividends Index for the Public Sector report. The Public Sector Index structure is modeled off of the Center’s Racial Equity Dividends Index for the Private Sector, which launched in 2022 for private sector employers.

How To Participate

Registration for the first annual Racial Equity Dividends Index for the Public Sector begins at the end of April and will be available to city and county governments in Minnesota and select jurisdictions across the United States. Email me at narnosti@centerforeconomicinclusion.org if you have questions, and stay tuned for more information about registration for the Public Sector Index in the coming weeks!

Who are your subcontractors? Why organizations at the forefront of racial equity are measuring Tier 2 supplier diversity

Maggie Dalton

By Maggie Dalton, Senior Analyst

Buying goods and services from businesses owned by Black, Indigenous, Latino, and Asian people enable companies to benefit from new ideas and access new markets. That’s why more leaders in the private and public sectors are recognizing that their organization's supplier base is a critical lever for building a racially equitable economy.

A racially diverse local supplier pool can bring greater resilience and new resources into historically underinvested communities, building individual and community wealth. But robust supplier diversity efforts go beyond valuing racial diversity among direct suppliers — these efforts recognize that a supplier's subcontractors, or Tier 2 suppliers, matter, too.

That’s why one of the racial equity standards in the forthcoming 2023 Racial Equity Dividends Index is: Does your organization measure the racial diversity of its Tier 2 suppliers?

Standards related to procurement show some of the greatest opportunity for improvement among organizations who participated in the 2022 Racial Equity Dividends Index.

Just 39% of organizations who participated in the 2022 Racial Equity Dividends Index have an enterprise-wide practice of collecting and sharing data on the racial diversity of suppliers. Measuring the racial diversity of Tier 2 suppliers is a new standard for 2023.

Supplier diversity programs, which seek to build a diverse supplier base within organizations, have existed for decades, though it remains an area of business practice that is quickly evolving. Many businesses are just beginning their supplier diversity journeys, leading to a real competitive advantage for those who focus on diversifying in this area.

Research finds that diverse suppliers increase innovation, competition, and resilience throughout the value chain and unlock additional value, both for businesses and regions through increased business activity and economic growth. Moreover, investing in minority-owned businesses is investing in building prosperity in Black, Indigenous, Hispanic, and Asian communities.

Due to historic patterns of underinvestment, Black, Indigenous, Hispanic, and Asian-led firms often have smaller revenues and staff than white-led companies and may be better positioned to start with smaller contracts and grow. Also due to their smaller size, these businesses are the ideal candidates for subcontractors or to deliver on specialized requests that primary contractors are unable to provide. Investing in minority-owned businesses as Tier 2 suppliers can provide on-ramps for suppliers of color, enabling them to grow, scale, and add capacity over time.

Beyond tracking Tier 2 spend for themselves, research from the Center for Economic Inclusion finds that procuring companies have the ability to influence Tier 1 suppliers to track and adopt measures of their own progress in subcontracting across their entire portfolio with businesses owned by people of color, therefore further expanding their influence.

For example, in 2019, Ford launched the Widening the Inclusion Network (WIN), designed to “further develop their existing supplier diversity programs through coaching, mentorship, and thoughtful partnerships with other diverse businesses.” Ford is leading the way by investing not only in businesses, but in relationships.

At the Center, we help companies implement promising practices to build racial equity for their workers and their communities. The Racial Equity Dividends Index is one tool we offer to help businesses measure their progress toward building a racially equitable and inclusive workplace.

The Index includes 43 racial equity standards across seven categories that support racial equity in workplaces: Leadership; Hiring; Culture, Retention, & Advancement; Procurement; Philanthropy & Investment; Public Policy; Products & Services.

We know many companies are leading the way in tracking Tier 2 supplier diversity as a part of growing supplier diversity initiatives.

Encourage your company to join the movement and evaluate progress towards building racially equitable and inclusive workplaces – workplaces that pay dividends for everyone.

If your company is interested in taking the next step to measure and continue building a racially equitable and inclusive workplace, be sure to register for the 2023 Index by March 10 to receive your confidential results and find out how your organization compares to others in your industry.