Supply and demand dont work quite as they did in the past. Shortages in one market arent corrected with higher prices if supply comes from another.

BUSINESSWEEK CASE: A Critical Shortage of Nurses
The United States is facing a severe nursing shortage. Already, an estimated 8.5 percent of U.S. nursing positions are unfilled—and some expect that number to triple by 2020 as 80 million baby boomers retire and expand the ranks of those needing care. Hospital administrators and nurses advocates have declared a staffing crisis as the nursing shortage hits its 10th year.
So why arent nurses paid more? Wages for registered nurses rose just 1.34 percent from 2006 to 2007, trailing well behind inflation. The answer is complicated, influenced by hospital cost controls and insurance company reimbursement policies. But another factor is often overlooked: Huge numbers of nurses are brought into the United States from abroad every year. In recent years nearly a third of the RNs joining the U.S. workforce were born in other countries.
Critics say this is a short-term solution that could create long-term problems. The influx of non-U.S. nurses allows hospitals to fill positions at low salaries. But it prevents the sharp wage hike that would encourage Americans to enter the field, which could solve the nursing shortage in the years ahead. “Better pay would signify to society that nursing is a promising career,” says Peter Buerhaus, a professor of nursing at Vanderbilt University. “Its a critical factor in building the workforce of the future.”
The U.S. market for nurses is a reflection of how labor markets can change with globalization. With new technology and the increasing movement of workers, labor markets are no longer local or even national. Supply and demand dont work quite as they did in the past. Shortages in one market arent corrected with higher prices if supply comes from another.
Pay isnt the only issue. Difficult working conditions and understaffing also deter qualified people from pursuing the profession. But average annual wages for registered nurses (one of the most highly trained categories) is now just under $58,000 a year, compared with a $36,300 average for U.S. workers overall. And its clear that qualified American nurses see that as not enough: 500,000 registered nurses are not practicing their profession—one-fifth of the current RN workforce of 2.5 million and enough to fill current vacancies twice over.
Hospitals insist the U.S. shortage is too severe to address simply with money. Carl Shusterman, an immigration lawyer in Los Angeles, says he has 100 hospital clients that have 100 vacancies apiece. With two- to three-year waiting lists to get into nurse-training programs in the United States, pressure to import nurses wont abate, he says, adding, “Even if we could train more nurses and pay them more, wed still need to import them.”
Raising pay has successfully attracted nurses in the past, however. To remedy a shortage that developed in the late 1990s, hospitals started hiking wages in 2001—and added 186,500 nurses from 2001 to 2003. Some advocates draw a direct link between wages and recruiting. A 2006 study by the Institute for Womens Policy Research concluded, “Increasing pay for nurses is the most direct way to draw both currently qualified and aspiring nurses to hospital employment.”
While nurses advocates say better pay is critical, they also argue that working conditions must improve if the United States is to cultivate an enduring nursing workforce. “You will draw in some people with a good pay raise, but you wont necessarily get them to stay,” says Cheryl Johnson, a registered nurse and president of the United Association of Nurses, the largest nurses union in the United States. “Almost every nurse will tell you that staffing is a critical problem. The workload is so great that theres not time to see how [patients are] breathing, give them water, or turn them to prevent bedsores. The guilt can be unbearable.”
Whatever mix of better wages, better working conditions, and foreign workers hospitals employ, solving the nursing shortage in the long run will require solutions on several fronts. “Nurses are getting more organized, but major change isnt going to happen overnight,” says Suzanne Martin, a spokeswoman for the United Association of Nurses, noting that other groups “would prefer to keep things as they are.”


SOURCE: Excerpted from Moira Herbst, “A Critical Shortage of Nurses,” BusinessWeek, August 29, 2007, downloaded from General Reference Center Gold,