Labor Market Research

Illinois is in the midst of a nursing shortage that is expected to intensify as baby boomers age and the need for health care grows. Compounding the problem is the fact that nursing colleges and universities across the country are struggling to expand enrollment levels to meet the rising demand for nursing care.

Tracking nurses by age, State, and highest education level attained (i.e., diploma or associate degree, baccalaureate degree, and graduate degree), the NSM produces annual, State-level projections of RN supply through 2020. Starting with the number of licensed Illinois RNs in 2000, the NSM adds the estimated number of newly licensed RNs, subtracts the estimated number of separations, and tracks cross-State migration patterns to calculate an end-of-year estimate of licensed RNs by State (Rosseter, 2007). The end-of-year estimate becomes the starting value for the next year’s projections.

To estimate the number of RNs active in the health workforce and the number of fulltime equivalent (FTE) RNs employed in healthcare, the model projects the number of licensed RNs and then applies workforce participation rates. In computing FTE RNs, nurses who work fulltime are counted as one FTE, while nurses who report working part time or for only part of the year are counted as one-half of an FTE. If wages for nursing services increase relative to wages in alternative occupations, then, all else being equal, nursing becomes a more attractive career. In the short run, an increase in wages for nursing services would increase the FTE RN supply by motivating:

• Licensed RNs not practicing nursing to return to nursing,

• Part-time RNs to work more hours, and

• RNs to delay retirement or leave retirement.

Market Research

The short-term percentage increase in FTE RN supply attributed to each 1 percent increase in wages for nursing services is referred to as short-term wage elasticity of supply.

In the long run, an increase in wages for nursing services will also attract new entrants to the nursing workforce (assuming no constraints on nursing school capacity). Because of the time to recognize an increase in RN wages and the time to train new nurses, a delay of several years is expected between the times that RN wages increase and new entrants to the nursing profession increase (U.S.D.H.H.S., 2003). The long-term wage elasticity of supply, consequently, is larger than the short-term wage elasticity of supply.

There exists a paucity of research that estimates the wage elasticity of supply for nurses, and the few studies that have been published report a large range of elasticity estimates. One challenge when assessing the validity of these estimates for modeling the supply of RNs is to distinguish between short-term and long-term wage elasticity’s and to distinguish between market wage elasticity’s and wage elasticity’s specific to a particular provider (e.g., if one hospital increases RN wages, then that hospital will draw nurses away from other hospitals).

The demand for nurses derives from the demand for healthcare services. To accurately project the demand for nurses, therefore, one must first project the demand for healthcare services. The NDM (Nurse Demand Projections) projects demand for