Labor Market Research

Labor Market Research

In most markets wages are determined by supply and demand, e.g. if the need for a particular position is great, wages will rise in order to attract more workers to this field. Interestingly, for nurses this has not been the case. An analysis of this situation found in a report brings up several key points. According to this research, over the late 1990s and into 2000, nurses' pay did not increase at all, although some hospitals had already begun worrying about a nurse shortage in 1997. When the wages began to rise, nurses responded promptly--hospitals added 186,500 nurses between 2001 and 2003. However, instead of competing for nurses by increasing pay, hospitals often turn to a combination of overworking (through mandatory overtime), contingent workers, understaffing, and one-time hiring bonuses to meet staffing needs. (Value care value nurses [VCVN], 2006)

The second point brings to mind the phrase "people face tradeoffs." Nursing is an arduous task, and if something less arduous, such as teaching, offers a comparable wage, people will leave nursing. In order to return to nursing, the wage had to be higher than that in these less-difficult industries. It was the trade-off between hard work and higher wages that was driving this move.

Another article reports that hospitals in some cities were colluding to keep wages down.

In 2006 hospitals in the cities of Albany, Chicago, Memphis, and San Antonio were accused of attempting to contain costs by agreeing in secret that they would not pay them more than a certain amount. By refusing to compete with each other, nurses had no choice but to accept the artificially low wage from the hospitals that employed them.

However, some nurses have taken action. If you look at the article Nurses Wages, we see the following excerpt:

"The lawsuits invoke the federal antitrust laws to force the hospitals to pay their nurses compensation that is long overdue. The conspiring hospitals have been taking extreme advantage of a vulnerable but critical component of the American healthcare system. They have been putting their bottom line ahead of patients and the nurses who care for them. For years, these hospitals have deliberately, secretly and systematically exchanged detailed, non-public, current information about the wages each is paying its nurses. The purpose and effect of this information exchange has been to permit the hospitals to suppress nurse wages - depriving nurses of a fair wage and contributing to the nursing shortage in our nation." (CMHT [CMHT], 2006)

Why, if there was a shortage, would they do such a thing? Returning to the first document, you will see that in addition to collusion,