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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.

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  • Edward J. Schumacher & Barry T. Hirsch, 1997. "Compensating Differentials and Unmeasured Ability in the Labor Market for Nurses: Why Do Hospitals Pay More?," ILR Review, Cornell University, ILR School, vol. 50(4), pages 557-579, July.
    • Handle: RePEc:sae:ilrrev:v:50:y:1997:i:4:p:557-579
    DOI: 10.1177/001979399705000401
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    Cited by:

    1. Daniel I. Rees & Joseph J. Sabia, 2015. "Migraine Headache and Labor Market Outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 24(6), pages 659-671, June.
    2. Edward J. Schumacher, "undated". "The Earnings and Employment of Nurses: Evidence from the 1990s," Working Papers 9803, East Carolina University, Department of Economics.
    3. Sæther, Erik Magnus, 2009. "Wage Policies for Health Personnel - Essays on the Wage Impact on Hours of Work and Practice Choice," HERO Online Working Paper Series 2005:1, University of Oslo, Health Economics Research Programme.
    4. Sæther, Erik Magnus, 2009. "Compensating differentials for nurses," HERO Online Working Paper Series 2004:10, University of Oslo, Health Economics Research Programme.
    5. Lanfranchi, Joseph & Ohlsson, Henry & Skalli, Ali, 2002. "Compensating wage differentials and shift work preferences," Economics Letters, Elsevier, vol. 74(3), pages 393-398, February.
    6. Hamermesh, Daniel S., 1999. "Crime and the Timing of Work," Journal of Urban Economics, Elsevier, vol. 45(2), pages 311-330, March.
    7. Barry T. Hirsch & Edward J. Schumacher, "undated". "Union Wages, Rents, and Skills in Health Care Labor Markets," Working Papers 9721, East Carolina University, Department of Economics.
    8. Lanfranchi, Joseph & Ohlsson, Henry & Skalli, Ali, 2002. "Compensating wage differentials and shift work preferences," Economics Letters, Elsevier, vol. 74(3), pages 393-398, February.
    9. Barry T. Hirsch & Edward J. Schumacher, 2012. "Underpaid or Overpaid? Wage Analysis for Nurses Using Job and Worker Attributes," Southern Economic Journal, John Wiley & Sons, vol. 78(4), pages 1096-1119, April.
    10. Spetz, Joanne, 2002. "The value of education in a licensed profession: the choice of associate or baccalaureate degrees in nursing," Economics of Education Review, Elsevier, vol. 21(1), pages 73-85, February.
    11. Hirsch, Barry & Manzella, Julia, 2014. "Who Cares – and Does It Matter? Measuring Wage Penalties for Caring Work," IZA Discussion Papers 8388, Institute of Labor Economics (IZA).
    12. Edward J. Schumacher, 2001. "The Earnings and Employment of Nurses in an Era of Cost Containment," ILR Review, Cornell University, ILR School, vol. 55(1), pages 116-132, October.
    13. Sæther, Erik Magnus, 2009. "Nurses’ labor supply with endogenous choice of care level and shift type A nested discrete choice model with nonlinear income," HERO Online Working Paper Series 2004:9, University of Oslo, Health Economics Research Programme.
    14. Michael Dueker & Ada Jacox & David Kalist & Stephen Spurr, 2005. "The Practice Boundaries of Advanced Practice Nurses: An Economic and Legal Analysis," Journal of Regulatory Economics, Springer, vol. 27(3), pages 309-330, January.
    15. Edward J. Schumacher, 1999. ""The Earnings and Employment of Nurses in an Era of Cost Containment," Working Papers 9910, East Carolina University, Department of Economics.
    16. Daniel S. Hamermesh, 1999. "Changing Inequality in Markets for Workplace Amenities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1085-1123.
    17. James Peoples & Bin Wang, 2007. "Privatization and Labor Cost Savings: Evidence from Health Care Services," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 35(2), pages 145-157, June.
    18. Janet Currie & Mehdi Farsi & W. Bentley Macleod, 2005. "Cut to the Bone? Hospital Takeovers and Nurse Employment Contracts," ILR Review, Cornell University, ILR School, vol. 58(3), pages 471-493, April.
    19. Edward J. Schumacher, "undated". "Relative Wages and the Returns to Education in the Labor Market for Registered Nurses," Working Papers 9720, East Carolina University, Department of Economics.
    20. Keith A. Bender & Hosne A. Mridha & James Peoples, 2006. "Risk Compensation for Hospital Workers: Evidence from Relative Wages of Janitors," ILR Review, Cornell University, ILR School, vol. 59(2), pages 226-242, January.

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