A few comments on labor markets before talking about some policy issues in the health professions.

Labor markets and how they work.   Wages in a labor market are pushed higher and lower by the intensity of supply of workers looking for work, and the intensity of demand for workers by employers, who are looking to fill jobs. Other things constant, as the supply of workers looking for jobs goes up, this tends to suppress wages. As demand for workers by employers goes up, it tends to raise wages. Things that tend to restrict supply tend to eventually lead to higher wages (things like higher educational requirements–which limit the number of workers. When the PT profession engineered a requirement for a doctorate degree some years ago (rather than a Master’s) it reduced the supply of new graduate PTs to be somewhat lower than would have been the supply otherwise — because some students who would have otherwise entered the profession would be disuaded from entering because of the added time and/or extra money it would take to become a PT.

Things that tend to change the demand for workers of a particular type also occur and change the demand for workers and the equilibrium wage  (such as new treament options, new technology in treatment for certain types of patients, availability of new types of workers who may be partial substitutes, and the design of the patient setting can influence demand for workers too. Thinkgs like COVID reduced the supply of healthy workers in the health professions (they got sick) and possibly also increaded the demand for healthcare services: both of these tended to increase wages being paid in health care.

Unions (where qualified workers join togethjer and “negotiate” wages and other terms of employment) tend to increase negotiation leverage beyond that of individual worker, and make wages higher as a result.

Governmental occupational licensing (eg like many health professions) require specific conditions be met to be licenced ( a degree from an accredited school, passing an exam, etc.). These requirements will limit supply because some workers who would otherwise be in the workforce competing for available jobs will not be able to be licensed for various reasons——and thus, licensure will always cause wages to be higher than they would otherwise be in that profession.

Both unions and Occupational licensure will also cause costs of health care services to be higher than they would otherwise be (and health spending will be higher too). .

The operation of health delivery, health insurance, health professional requirements and education, and other aspects of health care are deeply embedded in government policy. Yes, we have a market-based health care system (private providers, private insurance, private training programs for professionals) but nearly every aspect of the system is prone to government intervention. While we don’t want government deciding what price to put on new technology, or what kinds of coverage packages there are for insurance, or what doctor persons need to go to, or what limits might be put on the services we want to buy——we in the health care business definitely turn to government to help us get what we want. Professional associations (AMA, AHA, ANA, etc) are actively working to get the legislature or get the congress to tilt the marketplace in their favor. Relentlessly. While we often hear people praise competition, what they usually mean is that we want protection for ourselves, and competition for every one else!

The most recent Nursing Shortage scare is an interesting case in point about the way Professions try to get their way, not thru the marketplace (they have little control over Supply and Demand), but through intervention by government. This pattern of practice extends throughout the health professions, not so much in non-health professions, and it sets them apart from unions, where the idea is to use market power to get what you want in negotiation with employers.

The recent “shortage” of nurses was like the others that came before it. Maybe once every 10-15 year we experience these events. It starts with newspaper stories about unfilled vacancies in hospitals (part of the Hospital association’s PR campaign)   —employers cant find the number of nurses they would like to hire at the current wage level. Rather than shut up, and raise the pay to get the extra nurses they need, they tacitly form a pact with other employers to fix the problem another way, a way that doesn’t require a “wage war” between employers to get the extra nurses they need. They go to the media first.   The media is talking about it, interviewing hospital administrators who rant about the inability to find nurses to fill their vacancies, and how patients suffer. Nurses are also interviewed who rant about forced overtime and stress and burnout, and the potential for the poor, suffering patients. The professional groups hire researchers to do studies about it.  Congress and states hold hearings, remedies are proposed (below). It’s endless. Of course other professions have periodic shortages too—- software engineering, cost accountants, money managers, etc. These are important to society too, and the shortages may be bigger and last longer, but we don’t hear about it. Why do we hear about Nursing shortages, maybe even primary care doctor shortages?

One reason is because of the usual and customary practices of the health professional associations. They look to their friends in Congress in particular, for solutions. What has generally happened as a solution to past nursing shortages? Well, what happened, after stirring up local media to the seriousness of the shortage, the hospital administrators and deans of nursing schools go arm in arm to DC. They explain the crisis to their congress people. Congress or the Administration then proposes a new version of the NURSE TRAINING ACT (this happens regularly), which provides massive new training funds for universities, and new scholarship monies for students, allowing schools to expand supply. Everyone smiles and takes the shuttle home. The deans are happy, since they get to run bigger empires and become heros in their universities. The hospitals are happy, because this will ensure that they will not have to have a wage-war with other institutions over the inadequate supply of nurses. Unlike the usual case of a ‘shortage’ (excess demand for workers), when wages would typically rise for all nurses, the idea here is to boost supply, and keep wages from going up. Hospitals are happy. And in another couple of decades they’ll do it again next time someone declares another shortage is here.

Is the consumer better off? Well. Taxes have been used to fund more health care (education in this case, but it adds to the % of GNP used in health care), and there may be more nurses available at the bedside (though I do not think there is any evidence that hospitals actually respond to all this by increasing nursing care hours per patient day— it just keeps the wages lower).

Are nurses or the other professions better off? Well, wage increases are suppressed by the government intervention. And a good number of the new graduates will continue to stay out of the workforce, staying home, selling real estate, or whatever.  Maybe some get relief from stress because overtime pressures may be relieved. The government activity suppresses the cycle of shortages to boost wages. Hospitals win, universities that train nurses win, the deans win, and the nursing workforce loses.

Does this happen for other health professions. I do not know. In primary care, there are the same pressures, the same appeals to “importance” of health workers, and the need to create training packages stimuli. Other professional groups (dentists, PTs, dietetics, etc.) are too small to be able to find hospital administrators who would get on the plane with them to go lobby for relief of shortages. Or, maybe, as professional organizations they are more controlled by their members than are the nurses (who are controlled by the academic deans) and would NEVER argue for public policy that would suppress wages of working professionals! Can you see the Teamsters going to Washington to try to get new government programs to increase the supply of Truck driver training programs?

In general, the health professional organizations are deeply connected with government, at state and federal levels. This connexion has led to state laws to segregate each profession from all others, and make the state a protector of the unlicensed workers. Does the state come in to protect the driving of trucks by non Teamsters? No. And, the professions themselves are given the authority by states and feds to accredit educational institutions. That is, the professions essentially have control over the scope of work their persons do, the competencies of persons doing it, the supply of trained professionals.

This doesn’t mean that health professional groups are bad, or should be prevented from lobbying congress. But it points to the fact that professional groups (and every provider organization) is playing the governments to get more of what they want. Most of the licensure law upgrades, and frankly, most every action taken by government is done on behalf of patients: improving quality of services, increase patient safety, make the health services better. This is the argument that professionals always make, this is what the politicians buy. Does quality get better? Maybe. Does patient safety get better? Maybe. The research certainly points to the evidence that economic outcomes (about wages and costs) are clear and consistent, and they aren’t flowing to the patients or the taxpayers. Sure, we all heard the arguments:

• Nurses are surely getting older. What’s going to happen when the old ones retire?
• Vacancies are unfilled? Who’s going to take care of the patients?
• Wouldn’t outcomes get better if we had more nursing hours per patient?

Sure, these are what we hear. Someone has an idea of “need for nurses” and its not what we’re getting. And someone doesn’t like it.  But remember, these are the basis of the argument that is being made to mess with the usual market responses. If we have shortages, then let the wages rise to solve the problem. Let the schools decide to expand nursing programs if there is an excess demand for applicants to nursing schools. Don’t believe everything you hear. Remember who else has a stake in the game. The hospitals? Should we suppress nursing wages so that administrators can hire more nurses at lower rates of pay? Sure, patients would be better off with more nurses. They’d also so be better off if they didn’t drink sugary beverages, and if they had better access to doctors. Or if they we educated kids in the schools about basic prevention. What’s so special about spending tax money to allow more nurses to be trained so that hospitals don’t have to pay nurses more money? Is this the best value we could get if we truly were concerned about patients and citizens?

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