A Critical Shortage of Nurses

Moira Herbst, BusinessWeek

This story is the second in a series examining the state of the U.S. labor market. The U.S. is facing a severe nursing shortage. Already, an estimated 8.5 percent of the nursing positions in the U.S. 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, the longest stretch in 50 years. So why aren't 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 factors from hospital cost controls to insurance company reimbursement policies. But another factor is often overlooked: Huge numbers of nurses are brought into the U.S. 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 the low salaries they prefer to pay. 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.

"Nurses' wages need to be higher," says Peter Buerhaus, a professor of nursing at Vanderbilt University and an expert on the U.S. nursing workforce. "Better pay would signify to society that nursing is a promising career. It's a critical factor in building the workforce of the future."

The Effects of Globalization

The market for nurses in the U.S. 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 don't work quite as they did in the past. Shortages in one market aren't corrected with higher prices if supply comes from another.

These labor shortages can happen in fields as diverse as medicine, construction, farming and technology.

One of the most contentious debates over the labor market is playing out in the technology industry. As U.S. tech companies hire more programmers and developers from overseas, American workers complain of the impact on their compensation. Meanwhile, companies such as Microsoft (MSFT), IBM (IBM), Google (GOOG), Oracle (ORCL) and Motorola (MOT) have been arguing that the U.S. should let in even more skilled workers from abroad, both on a temporary and permanent basis. But computer scientists and software developers say such moves would discourage American workers from pursuing these specialties and hurt U.S. competitiveness in the long term.

Several Factors at Play

In nursing, pay isn't 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 it's clear that qualified American nurses see that as not enough: There are 500,000 registered nurses who are not practicing their profession -- fully 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 U.S., pressure to import nurses won't abate, he says. "Even if we could train more nurses and pay them more, we'd still need to import them," says Shusterman. "It's ridiculous to claim that any foreign nurse is taking a job away from an American."

Undeniable Results

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 Women's Policy Research, 'Solving the Nursing Shortage Through Higher Wages,' concluded that "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 U.S. is to cultivate an enduring nursing workforce.

Future projections of staffing troubles are ominous. The current 8.5 percent shortage is expected to surge to 29 percent -- or more than 810,000 nurses -- by 2020, according to the U.S. Health & Human Services Dept. "You will draw in some people with a good pay raise, but you won't 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 U.S. "Almost every nurse will tell you that staffing is a critical problem. The workload is so great that there's 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 a number of fronts. "Nurses are getting more organized, but major change isn't going to happen overnight," says Suzanne Martin, a spokeswoman for the United Association of Nurses, which represents 115,000 RNs. "There are other interests and lobbies that would prefer to keep things as they are."

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Herbst is a reporter for BusinessWeek.com in New York. Copyright 2000-2007 by The McGraw-Hill Companies Inc. All rights reserved.

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