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Compensating differentials and unmeasured ability in the labor market for nurses: Why do hospitals pay more?

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  • Edward J. Schumacher
  • Barry T. Hirsch

Abstract

Registered nurses (RNs) employed in hospitals realize a large wage advantage relative to RNs employed elsewhere. Cross-sectional estimates indicate a hospital RN wage advantage of roughly 20%. This paper examines possible sources of the hospital premium, a topic of some interest given the current shifting of medical care out of hospitals. Longitudinal analysis of Current Population Survey data for 1979-94 suggests that a third to a half of the advantage is due to unmeasured worker ability, and the authors conclude that the remainder of the advantage probably reflects compensating differentials for hospital disamenities. Supporting these conclusions is evidence that hospital RNs have higher cognitive ability and higher-quality job experience than non-hospital RNs, and indications that shift work accounts for roughly 10% of the hospital premium. (Abstract courtesy JSTOR.)

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Bibliographic Info

Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 50 (1997)
Issue (Month): 4 (July)
Pages: 557-579

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Handle: RePEc:ilr:articl:v:50:y:1997:i:4:p:557-579

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References

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  1. Hirsch, B.T. & Scumacher, E.J., 1996. "Union Wages, Rents, and Skills in Health Care Labor Markets," Working Papers 1996_03_02, Department of Economics, Florida State University.
  2. Dumond, J Michael & Hirsch, Barry T & Macpherson, David A, 1999. "Wage Differentials across Labor Markets and Workers: Does Cost of Living Matter?," Economic Inquiry, Western Economic Association International, vol. 37(4), pages 577-98, October.
  3. Adamache, Killard W. & Sloan, Frank A., 1982. "Unions and hospitals : Some unresolved issues," Journal of Health Economics, Elsevier, vol. 1(1), pages 81-108, May.
  4. Kevin T. Reilly, 1995. "Human Capital and Information: The Employer Size-Wage Effect," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 1-18.
  5. Erica L. Groshen & Alan B. Krueger, 1990. "The structure of supervision and pay in hospitals," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 134-146, February.
  6. Peracchi, Franco & Welch, Finis, 1995. "How representative are matched cross-sections? Evidence from the Current Population Survey," Journal of Econometrics, Elsevier, vol. 68(1), pages 153-179, July.
  7. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  8. Jakubson, George, 1991. "Estimation and Testing of the Union Wage Effect Using Panel Data," Review of Economic Studies, Wiley Blackwell, vol. 58(5), pages 971-91, October.
  9. Robert Gibbons & Lawrence F. Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc.
  10. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  11. Hwang, Hae-shin & Reed, W Robert & Hubbard, Carlton, 1992. "Compensating Wage Differentials and Unobserved Productivity," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 835-58, August.
  12. Roger Feldman & Richard Scheffler, 1982. "The union impact on hospital wages and fringe benefits," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 35(2), pages 196-206, January.
  13. Macpherson, David A & Hirsch, Barry T, 1995. "Wages and Gender Composition: Why Do Women's Jobs Pay Less?," Journal of Labor Economics, University of Chicago Press, vol. 13(3), pages 426-71, July.
  14. Hirsch, Barry T. & Schumacher, Edward J., 1995. "Monopsony power and relative wages in the labor market for nurses," Journal of Health Economics, Elsevier, vol. 14(4), pages 443-476, October.
  15. LaVonne A. Booton & Julia I. Lane, 1985. "Hospital Market Structure and the Return to Nursing Education," Journal of Human Resources, University of Wisconsin Press, vol. 20(2), pages 184-196.
  16. Kostiuk, Peter F, 1990. "Compensating Differentials for Shift Work," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1054-75, October.
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