"We will recruit the care workers needed to look after residents well by guaranteeing fair pay, full rights at work, and proper training." Those were the words of the then Shadow Health and Social Care Secretary Wes Streeting on the priorities of a Labour government for care.

Those words remain relevant today, in the first few months of Labour's administration. The sector continues to suffer from chronic workforce shortages, with 131,000 vacancies across social care.   

Given the restrictions on immigration introduced by the Conservatives and set to be continued by Labour, which saw the number of visas issued for health and social care fall by more than 80 per cent, making care a more attractive profession for domestic workers is essential.

Low pay crisis  

Central to Labour's ambitions is its proposed Fair Pay Agreement (FPA) for social care, which will improve pay for those in the sector and thereby make it more attractive for employees. The diagnosis of a low-pay crisis is the right one.   

According to the Joseph Rowntree Foundation, social care workers in the UK are among the lowest earners, with median pay in the bottom 20th percentile of all available jobs in the economy.  

Many care workers, especially those in home care, earn less than comparable NHS roles and are often unpaid for travel time between clients, sometimes earning less than the minimum wage. Low pay not only affects worker livelihoods, as one in five care workers live below the poverty line, but also exacerbates chronic recruitment and retention issues.   

Skills for Care estimates that recruiting a new care worker costs providers approximately £3,600 due to the need for training, hiring processes, and productivity losses compared to the skills of the lost employee. With a turnover rate of almost 30 per cent, it's no wonder that the Care England Pulse Check found that 43 per cent of providers were struggling with recruitment costs. 

So, the problem appears clear – but what about Labour's proposed solution? First, it's probably best to turn to New Zealand, where these ‘fair pay’ agreements were first introduced, to better understand Starmer and Streeting's challenges.     

New Zealand's experience

In 2018, New Zealand's then-Labour-led government under Jacinda Ardern established a tripartite working group to lay the groundwork for FPAs. This group brought together unions, businesses, and labour market experts to create a system enabling sector-wide bargaining, aiming to improve pay and conditions across industries.

However, despite the collaborative process, the FPA system didn't gain traction quickly enough. At the same time, six sectors, including bus drivers and early childhood educators, received approval to start bargaining, and no pay settlements were finalised before a new right-wing coalition repealed the legislation in 2023.

Part of the problem was that FPAs faced enormous opposition from the beginning. The biggest opposition to the measures were employer groups, particularly BusinessNZ, the main body representing employers in New Zealand. That opposition continued despite being involved in the FPA process.

The New Zealand experience underlines a critical point for the UK: creating a sustainable framework for fair pay in social care will require more than compromise on every detail. Public and industry support is needed to help the policy withstand attacks from other parties and ensure its long-term viability.  

Fragmentation in care

A further problem in adopting this collaborative model is the difficulty in finding ideal representatives for either businesses or carers in the sector. With around 18,000 mostly small care providers employing 1.5 million workers—many of whom are directly hired by the people they care for—there is no unified employer or worker representation.   

Union membership is also low, particularly in the private sector, where most care workers are employed. Only 15 per cent of union members are in the private sector, compared to 41 per cent in the public sector. This fragmentation complicates efforts to establish sector-wide agreements as there is no clear bargaining structure.    

State financed?

Finally, there remains the cost of FPAs. Paying carers more, which appears agreed upon by almost all political parties and stakeholders as essential, requires more money spent on the costs of care. Where the burden for that falls is unclear.   

To raise wages to £15 an hour, as unions advocate, the Department for Health has projected a cost of £24 billion over the next few years. Comparisons with New Zealand’s original proposals suggest similarly high costs, with some estimating an annual impact of £9.9 billion for the UK, with £4 billion potentially falling on taxpayers via costs passed on to local authorities.  

Funding these increases without compromising care quality or access is crucial. While providers could theoretically absorb some costs through reduced profit margins, the Institute for Fiscal Studies warns that the sector's financial fragility makes this unlikely without additional government support. 

Ensuring adequate funding for local authorities will be necessary to sustain quality care and avoid increased strain on already stretched services.  

The push for FPAs in social care is rooted in the critical aim of reducing inequality and staffing shortages that have plagued the sector for years. However, to ensure sustainability, the Labour government must secure industry support and plan for substantial investment. New Zealand's experience underscores the importance of building a case for fair pay within the sector rather than relying solely on legislative frameworks.  

By learning from these insights and adopting a pragmatic, inclusive approach, the UK has a unique opportunity to transform its social care system and provide fair, livable wages to those who care for some of society's most vulnerable.