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---
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title: Who Decides What's Essential
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section: Beyond Co-ops
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order: 112
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summary: A public subsidy for "essential" low-paid work invites every low-wage industry to call itself essential, so a fixed formula decides which work qualifies, the money goes to workers by the hour, and states can't use it as a reason to pay less.
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---
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# Who Decides What's Essential
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[The floor](the-floor.md) includes a targeted subsidy for essential low-paid work, paid to workers, not firms. Somebody has to clean the nursing home for the poor, and if the work can't pay a decent wage, the public should.
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The danger is in the word "essential." Whoever decides which work counts gets to set part of the price of labor in that industry. Every low-wage industry will discover that it's essential, and every one has lobbyists.
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## How fast "essential" grows
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We've seen it happen. Early in the COVID-19 pandemic, the federal government published an advisory list of "essential critical infrastructure workers" who should keep working. Researchers at the CDC's occupational safety institute later matched it to standard industry codes. It covered industries employing about 81% to 87% of American workers, depending on how industries are counted ([Billock and others, 2022](https://pubmed.ncbi.nlm.nih.gov/35532007/)). That list was only advice about who could keep working, with no money attached, and "essential" still ended up meaning nearly everyone. A list that came with money would be under even more pressure.
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## Who really gets the money
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The second danger is quieter. Money aimed at workers can end up with employers.
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The Earned Income Tax Credit tops up low earners' pay through the tax system. Because it draws more people into low-wage work, it pushes those wages down. One careful simulation, using a range of plausible assumptions about how workers and employers respond, found that each dollar spent raises workers' after-tax incomes by only about 73 cents. Employers capture much of the rest through lower wages, partly at the expense of low-wage workers who don't get the credit at all ([Rothstein, 2010](https://www.nber.org/papers/w14966)).
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Washington, D.C., tried a more direct route. Its Early Childhood Educator Pay Equity Fund paid child care workers supplements of $10,000 to $14,000 a year, sent to the workers themselves, outside their employers' payrolls. More than 4,000 educators received them, and over $80 million went out in the first two years ([D.C. OSSE](https://osse.dc.gov/ecepayequity)). An independent study found the fund added about 219 child care educators, around 7% more than there would otherwise have been. Employers' own pay didn't change, so in those two years they didn't claw the money back by cutting wages ([Mathematica, 2024](https://www.mathematica.org/publications/two-year-labor-market-impacts-of-washington-dcs-early-childhood-educator-pay-equity-fund)). Two years is short, though, and D.C. has since switched to paying the money through employers' payrolls. D.C. also shows a limit of what follows: child care is mostly paid for by families, so the test below may leave it out.
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Minnesota took a third route, and it gives workers a voice. In 2023 it created a board of three state officials, three employer representatives and three worker representatives, with the power to set minimum pay for nursing home workers. The board set $22.50 an hour for certified nursing assistants and at least $19 for everyone else, rising in 2027. The state pays for it through the rates Medicaid pays nursing homes, and it took effect in September 2026 after federal approval ([Minnesota Nursing Home Workforce Standards Board, 2025](http://www.dli.mn.gov/sites/default/files/pdf/nhwsb_annual_report_2025.pdf); [RMCEP](https://www.rmcep.com/success-stories/news-archive/p/item/69158/minnesotas-minimum-wage-standards-for-nursing-home-workers-in-effect-sept-10)).
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## The model's answer
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### A formula decides, not people
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No official, agency or Congress picks industries by name. Work qualifies only if it passes two tests, measured from published government data:
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1. **The public already pays for most of it.** Over the last three years, at least half of the industry's revenue came from public benefit programs like Medicaid, Medicare, veterans' care and public child care assistance. Ordinary government purchasing, like cleaning or security contracts, doesn't count. In 2023, Medicaid alone paid for 60% of the spending category that covers most home and community-based care, and for 30% of nursing home care ([MACPAC](https://www.macpac.gov/medicaid-101/spending/)). Whether nursing homes pass depends on Medicare and other public payers too.
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2. **The job pays less than most.** The typical hourly wage for the job, within that industry, is below the typical wage for all American jobs. In May 2025 that was about $24.50 an hour ($50,980 a year). Home health and personal care aides earned a typical $17.21 an hour, and nursing assistants $20.13 ([BLS, home health and personal care aides](https://www.bls.gov/ooh/healthcare/home-health-aides-and-personal-care-aides.htm); [BLS, nursing assistants](https://www.bls.gov/ooh/healthcare/nursing-assistants.htm)). The test is by job, not by industry, so the nurses and managers in a nursing home don't pull the aides' number up, and splitting staff into separate companies doesn't change anything.
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The first test is the important one, and it's really a test of who pays, not of what's "essential." That's on purpose: it's the one test lobbying can't argue its way around. Where the public is already the main buyer, the public is already setting the price, and a low public rate is a choice about what these workers are paid. It also keeps the program narrow. Retail, restaurants and other low-wage work paid for by private customers don't qualify. They're covered by the parts of the floor that apply to everyone, like the minimum wage and tax credits. Averaging over three years means an industry can't tip itself over the line in a single year.
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The national statistics agencies apply the formula every three years and publish the list, using data sources named in the law, with old industry codes mapped to new ones when the codes are revised. Congress can change the formula, but only for everyone at once, with a published cost estimate. It can't add one industry by name.
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### Paid to workers, by the hour
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- **Straight to the worker,** as a fixed amount per hour worked, as D.C. did at first. It's taxed like wages but doesn't count as income for the worker's own benefits, like Medicaid or food assistance, so it can't knock anyone off them.
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- **Real hours only.** Federal payroll forms report pay, not hours. So hours come from records that already exist for public programs, like the electronic visit records federal law has required for Medicaid home care since 2020 ([Medicaid.gov](https://www.medicaid.gov/medicaid/home-community-based-services/guidance/electronic-visit-verification-evv)), and from employers' own payroll hours where those aren't available. Hours per worker are capped, samples are audited, and when padded hours are found, the employer repays.
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- **Everyone doing the work counts,** including home care workers employed directly by the people they care for through a state program, and self-employed providers paid by a public program.
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- **It fades out gradually** as a worker's own hourly pay rises above the threshold, instead of stopping all at once. That means someone just above the line keeps less of each raise for a while, a real cost stated openly.
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- **Same for everyone.** Co-ops and conventional firms qualify on exactly the same terms. The subsidy doesn't favor co-ops, and it doesn't skew [the pilot's](pilot-spec.md) comparison with conventional firms, because both sides get it.
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### Stopping the money from leaking
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Money aimed at workers has three ways out. Each gets its own rule.
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- **The public payer.** The biggest risk is that states cut their Medicaid rates, knowing the federal supplement will fill the gap. So a state's rates for qualifying care can't fall behind inflation. If they do, the federal share of the state's Medicaid spending on that care drops by the same amount. The supplement also can't count toward any rule requiring a share of rates to go to wages, and it's left out when rates are set.
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- **The employer.** An employer can't let any job's total pay, wages plus benefits, fall behind inflation compared with the year before its workers qualified. One that does repays the difference to its workers, with a penalty. Pay in qualifying work is compared every year with similar work that doesn't qualify, so slower raises show up.
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- **The owner.** In industries full of related-party rent and management fees, public money that frees up payroll can still end up with owners. The supplement doesn't fix that. It's a reason for the rate rules states set, and for co-ops.
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### The budget
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The supplement is a fixed amount per hour, set in law and adjusted for inflation, so it doesn't shrink when Congress wants to starve it quietly. The cost is whatever that amount times the qualifying hours comes to, published every year. When the formula adds an industry, the cost rises, and everyone can see by how much.
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For scale: $2 an hour for 5 million workers averaging 1,500 hours a year costs $15 billion a year. There are about 4.7 million home health and personal care aides alone ([BLS](https://www.bls.gov/ooh/healthcare/home-health-aides-and-personal-care-aides.htm)), though not all of them would qualify.
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### Worker voice, too
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A formula keeps lobbyists out, but it also leaves workers out. Minnesota's board shows another way: workers, employers and the state set minimum pay together, and the public rates pay for it. The two fit together. States can set up boards like Minnesota's for qualifying work, and the federal supplement comes on top, because states can't cut their own spending.
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### A way off the list
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The founding plan pairs this subsidy with public research on automating the same work, and says plainly that it's meant as a bridge, not forever ([Ownership and the Floor](the-floor.md)). The formula makes the exit automatic. The wage test is measured without the supplement, so the supplement itself can't push an industry off the list. When real pay rises, because of automation, higher public rates or anything else, the industry drops off, fading out over two reviews rather than all at once. For care work, the bridge will probably be long. It ends when the public pays what the work is worth.
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## What this doesn't solve
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- **Some essential work won't qualify.** Where families, not the public, pay most of the cost, the formula leaves the work out. That may include a lot of child care, where D.C.'s evidence comes from. Families who pay for care themselves, and people who care for relatives unpaid, get nothing from this. That's the price of a rule that can't be bent. States can still do what D.C. did.
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- **The formula will be fought over.** Industries will argue about how their work is classified and what counts as public revenue. Checking workers against public program records, not just the codes employers pick, is the defense. It isn't perfect.
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- **Capture isn't ruled out.** The rules catch pay cuts, including cuts in benefits, and states cutting their rates. They can't catch every raise that would have happened anyway.
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- **It costs real money.** Tens of billions of dollars a year is plausible once home care and nursing homes qualify. That's a choice about what care workers are paid, and the page states it so voters can make it.
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- **It's federal money for work states largely pay for.** States already can, and some do, raise care workers' pay themselves. The federal role here is to make that pay not depend on where you live, and to stop states using it as a reason to pay less.
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- **Congress can still change the formula.** It's harder to bend than a list, not impossible.
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Claude Opus 5.5