England’s social care system is facing a deepening crisis — squeezed by rising labour costs, chronic underfunding, and a workforce stretched beyond capacity. The latest expected increase in the national living wage to £12.70 an hour has reignited debate about how to sustain a sector that employs hundreds of thousands of people yet remains one of the lowest-paid in the UK economy.
Wages Rising, but Stability Falling
Around 60% of care workers received a pay rise in April when the minimum wage rose to £12.21. Another increase should, in theory, make social care jobs more attractive. Yet for many providers, the change poses a dilemma. When wages in care rise in line with those in retail, logistics, and hospitality, employers must compete for the same pool of low-paid workers — but without the flexibility or financial margins of other sectors.
Unlike accountancy firms or corporate employers that can adjust salaries and fees, care homes rely heavily on fixed payments from local authorities. With four out of five councils already overspending on adult social care, there is little room to raise fees or fund meaningful wage improvements.
“Seventy-five per cent of our overheads are human beings — and we need them,” said Haris Khan, director of Curaa Group, which runs four care homes. “The national living wage makes sense, but the government must consider how it works in a system where councils set the rates.”
A Market Built on Minimum Wages
Analysts at LaingBuisson, a health and care market consultancy, say that outsourcing in the 1990s transformed the sector from publicly run to predominantly for-profit, dependent on private providers paying staff close to the legal minimum. As council budgets tightened, fees paid to care homes fell below the true cost of care, forcing “self-funding” residents to cross-subsidise those whose places are state-funded.
This structure has trapped the system in a cycle of underpayment and underinvestment. Even as wages rise, care providers face escalating costs for insurance, energy, and compliance. Many say the margin for reinvestment or wage progression has vanished.
A Workforce in Perpetual Shortage
Vacancy rates in adult social care hover around 7%, far above the national unemployment rate or even the 2.4% vacancy rate in retail. When the wider economy slows, care work attracts jobseekers; when it recovers, workers leave for better-paid roles elsewhere.
One care manager summed up the fragility of staffing: “I dread hearing Aldi is opening nearby — I know I’ll lose staff.”
The sector’s pay structure provides little incentive for long-term careers. Workers with over five years’ experience earn on average just seven pence more per hour than new starters — a premium that has shrunk sharply from 33 pence in 2016, according to Skills for Care. By contrast, NHS healthcare assistants with comparable experience earn roughly 82 pence more per hour.
Moreover, 70% of private care homes contribute only the legal minimum 3% to staff pensions, adding to low morale and turnover.
Labour’s Plan: Reform or Relief?
The Labour government has pledged to address what it calls “a broken model.” Former homelessness tsar Louise Casey will chair a new independent commission on adult social care, reporting in 2028. A £4 billion funding plan by 2028–29 includes a “Fair Pay Agreement” (FPA), designed to establish national standards for pay and conditions through a new negotiating body.
However, with only £500 million initially earmarked, the FPA’s scope appears limited. Smaller providers fear that new employment rules could increase administrative costs without sufficient funding. “There is simply no slack,” Khan warns. “Extra rules on hiring and flexibility risk pushing providers to do without staff — which threatens quality of care.”
Fixing the Model
Experts and policymakers agree that reform must go beyond wages. Proposed measures include:
- Regulating pay differentiation, ensuring care workers earn more than other low-paid service roles (as already done in Wales and Scotland).
- Creating career pathways through qualifications, leadership training, and values-based recruitment focused on empathy rather than experience.
- Addressing benefit disincentives, so workers are not penalised for taking extra hours.
But these measures require either higher local authority fees or greater taxpayer funding — both politically sensitive and financially challenging.
The Bigger Question
At the heart of the debate lies a fundamental issue: who pays for care? With an ageing population and more complex care needs, England’s system — reliant on low wages and high turnover — is becoming unsustainable.
The challenge for Labour is to transform care work from a last-resort job into a respected career, with fair pay, progression, and dignity. That will require not only higher wages, but also long-term public investment to stabilise providers and meet growing demand.
Without it, the sector risks remaining trapped in a cycle of shortages, burnout, and declining standards — the hallmark of England’s broken care economy.
