LABOR SUPPLY OF NURSES AND NURSING ASSISTANTS IN THE UNITED STATES, THE

INTRODUCTION

Health care administrators and public policy makers are publicly much concerned with the labor furnish of nurses and nursing assistants. Hospitals and nursing abiding-places complaining of labor shortages, entreaty public assistance to enable them to pay higher wages. Before committing public capitals policy makers want up-to-date estimates of the wage elasticities of labor replenish for nurses and nursing assistants. Constructing a framework within which these elasticities can be estimated requires consideration of the nature and possible origins of the reported shortages.

REVIEW OF THE LITERATURE

Reported shortages

"Shortages," in various faculty of perceptions have been reported for decades in U markets for supply with nourishments and nursing assistants. Although this bourn is used loosely in the noneconomic literature, at least a certain quantity of instances seem to involve persistent exces demand.1 To explain similar excess demand in labor markets, economists have frequently looked to deviations from finished competition, most notably employers' monopsony power, inflexible relative wages, and incomplete contracts.

Monopsony power

A mould of monopsonistic equilibrium in the nursing labor market was introduced through Yett (1970) and extended and applied by means of Currie et al. (2002), Grosskopf et al. (1990) Link and Landon (1975) Robinson (1988) and Sullivan (1989) In this design a local monopsonist derives its marginal expenditure (ME) function from a given labor invest function, chooses a quantity of labor to equate its ME with its marginal income product (MRP), and pays just enough to attract this quantity of labor, given the labor replenish curve. The gap between its chosen occupation level and that which would equate its MRP to its chosen wage, as shown in Figure 1 may be individual source of frequent reports of nurture shortages.

This analysis, with minor modifications, can be reach forthed to oligopsony and monopsonistic competition. Indeed, whenever employer face upward sloping labor replenish curves, they have a stage of monopsony power. Evidence that monopsony power, in various forms, is widespread in labor markets is neared by Bhaskar et al. (2002) and Manning (2003)

Forms of public assistance repeatedly requested by health care providers-e.g., more generous reimbursement for treating Medicaid patients-could shift MRP schedules upward. This would typically increase wages and employ without reducing reported shortages. in what manner much employment increased would, of course, be pendent on the wage elasticity of stock

Monopsony power in labor markets is likely to be relatively weak in areas with a high density of suitable employer When labor shortages are nonetheless reported in similar areas, other market imperfections are likely responsible. Evidence that monopsony power is les than ubiquitous in nursing labor markets and les than adequate to explain observ consequences is presented in Hirsch and Schumacher (1995) Hirsch and Schumacher (2004) and Staiger et al. (1999) Doubts about monopsony power as an explanation of reported shortages may motivate consideration of sum of two units other possibilities: rigidity of relative wages and incomplete contracts.

Rigidity of relative wages

The relative wages of employee who work together may be stabilized through considerations of fairness. Persistent wage constructions have long been observed in several industries (Dunlop 1957; Kim 1999) In the health care sector, Krall notes, administrators have feared that changes in the customary wage differentials among registered supply with nourishments (RNs), licensed practical nurses (LPNs) and nursing aides, orderlies, and attendants (NAOAs) could create dissension and undermine cooperation (Krall 1995)

Rigidity of relative wages may help explain reported shortages for more [i]or[/i] less categories of nurses. Starting from an initial equilibrium in which wages for all categories of supply with nourishments have been independently set at horizontals that clear each market, think that the MRP curve shifts outward for individual group of nurses but inward for another. Employer may want to raise wages for the former and make an incision in them for the latter on the other hand be deterred by fear of upsetting the customary wage construction Aversion to wage cuts is intermixed by a belief, widespread among employer that like cuts hurt morale and accelerate labor turnover (Bewley 1999) below these circumstances, the shifting MRP 1s are likely to result in exces demand for single group of nurses and exces provide of the other.

Incomplete contracts

The greatest in quantity recent suggestion for explaining persistent reports of shortage is proffered by Heyes (2003), who notes that labor contracts covering supply with nourishments are incomplete in the faculty of perception that although a contract may require a nurture to give injections it cannot effectively require her to give them "with delicate loving care" (p. 3). An employer wanting nourishs to go beyond their contractual obligations urgencys to attract nurses motivated in part by dint of a sense of vocation rather than simply through pay. Heyes shows that, below some conditions, raising wages increases the proportion of piece of work applicants motivated solely by pay. An employer who is unable to take note of applicants' motivations may prefer to hold fast wages low, hoping to attract mainly nurtures with the desired sense of vocation.2