Tuesday, June 16, 2009

A few thoughts on the nursing labor market

In addition to having the honor of being on the radio last week, a few other health economists of my generation have been on the radio or TV lately--each locally. One of my colleagues--Joanne Spetz (you can see her faculty profile at http://nurseweb.ucsf.edu/www/ffspetj.htm) was asked to comment on the nurse labor market. I won't claim to represent exactly what she said, but I know this is a hot topic at schools of nursing and among people looking to get back into the work force. So, I'll offer a few comments building on her ideas--have to give credit where credit is due.

For the first time in a long time, some nursing students have been having a more difficult time finding a job. Does this mean the nursing shortage that we have heard about for years is over? No.

Reason #1: Health care is a normal good--excuse the economics jargon. A normal good is one for which more is purchased when incomes go up. Right, now some people are out of a job--income down. Some people are feeling like they have less discretionary income--even if their income is constant or growing a little, the prices of things like electricity and gasoline are going up--that also makes people feel like their incomes are going down. Also, even if people's incomes are constant, they are paying more for health benefits--less to spend after buying health insurance. All of this will lead to less spending on health care if people's health doesn't change. Less being spent on health means we need fewer health care providers, including nurses.

Reason #2: More people are uninsured or having their health insurance benefits cut. This makes people pay more out of pocket. When they pay more out of pocket, they purchase less medical care. Again, this leads to less demand for nurses.

Reason #3: Nurses in the labor force are staying in the workforce longer (i.e. avoiding retirement) or looking for more hours. Nurses who were out of the labor force are returning to the labor force that they were out of when times were flush. All of this leads to more nurses being in the market to provide more hours.

So, with the demand for health care and ultimately nurses going down and the supply of nursing hours going up, we have less of a shortage.

Should states then stop looking to expand nursing faculty and should those who have been planning to go into nursing pull out? Probably not. Here's why:

We expect that sooner or later the economy will turn around. That will result in incomes going up. Policy will likely lead to more people being insured--more on that in a day or two. And, eventually, even if more people were not insured and the economy did not get better, the generation before mine will create a bigger demand for health care than any that has gone away because of the economy. Sooner or later we will need all the nurses that are in the labor force, that are being trained right now, and that will be trained in the near future. While the economic situation has led to some temporary relief of the shortage, the demographic situation will change this in the near future regardless of what happens to the economy.

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