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Underpaid or Overpaid? Wage Analysis for Nurses Using Job and Worker Attributes

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  • Barry T. Hirsch

    ()
    (Department of Economics, Andrew Young School of Policy Studies, Georgia State University, Atlanta, GA 30302-3992, USA; corresponding author)

  • Edward J. Schumacher

    ()
    (Department of Health Care Administration and Department of Economics, Trinity University, San Antonio, TX 78212, USA)

Abstract

Nursing shortages are common despite the fact that nurses earn far higher wages than other college-educated women. Our analysis addresses the puzzle of “high” nursing wages. Employee data from the Current Population Survey are matched with detailed job descriptors from the Occupational Information Network. Nursing requires high levels of compensable skills and demanding working conditions. Standard log wage regression estimates indicate nursing wage advantages of about 40%. Accounting for job attributes reduces estimates to roughly 20%. Rather than transforming ordinary least squares log gaps to percentages, alternative methods measuring Mincerian gaps produce estimates of 15% or less. We conclude that nurses receive compensation that is much closer to opportunity costs than that seen in standard analyses, narrowing the shortage puzzle. Supply constraints in nurse licensing can produce wages above long-run opportunity costs but that are too low to clear short-run labor markets during periods of growing demand. The analysis provides broader implications for the conduct of wage analyses.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 78 (2012)
Issue (Month): 4 (April)
Pages: 1096-1119

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Handle: RePEc:sej:ancoec:v:78:4:y:2012:p:1096-1119

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  1. Barry T. Hirsch & Edward J. Schumacher, 2004. "Match Bias in Wage Gap Estimates Due to Earnings Imputation," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 689-722, July.
  2. Bollinger, Christopher R. & Hirsch, Barry, 2005. "Match Bias from Earnings Imputation in the Current Population Survey: The Case of Imperfect Matching," IZA Discussion Papers 1846, Institute for the Study of Labor (IZA).
  3. Douglas Staiger & Joanne Spetz & Ciaran Phibbs, 1999. "Is There Monopsony in the Labor Market? Evidence from a Natural Experiment," NBER Working Papers 7258, National Bureau of Economic Research, Inc.
  4. Blackburn, McKinley L., 2007. "Estimating wage differentials without logarithms," Labour Economics, Elsevier, vol. 14(1), pages 73-98, January.
  5. Edward J. Schumacher & Barry T. Hirsch, . "Compensating Differentials and Unmeasured Ability in the Labor Market For Nurses: Why Do Hospitals Pay More?," Working Papers 9604, East Carolina University, Department of Economics.
  6. Ingram, Beth F. & Neumann, George R., 2006. "The returns to skill," Labour Economics, Elsevier, vol. 13(1), pages 35-59, February.
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  8. Janet Currie & Mehdi Farsi & W. Bentley Macleod, 2005. "Cut to the bone? Hospital takeovers and nurse employment contracts," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 494-514, April.
  9. Sullivan, Daniel, 1989. "Monopsony Power in the Market for Nurses," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages S135-78, October.
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  11. Manning, Willard G., 1998. "The logged dependent variable, heteroscedasticity, and the retransformation problem," Journal of Health Economics, Elsevier, vol. 17(3), pages 283-295, June.
  12. Manning, Willard G. & Mullahy, John, 2001. "Estimating log models: to transform or not to transform?," Journal of Health Economics, Elsevier, vol. 20(4), pages 461-494, July.
  13. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 411-482, July.
  14. Marco Manacorda, 2004. "Can the Scala Mobile Explain the Fall and Rise of Earnings Inequality in Italy? A Semiparametric Analysis, 19771993," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 585-614, July.
  15. Kostiuk, Peter F, 1990. "Compensating Differentials for Shift Work," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1054-75, October.
  16. 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.
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Cited by:
  1. Patricia Cortés & Jessica Pan, 2012. "Relative Quality of Foreign Nurses in the United States," CReAM Discussion Paper Series 1231, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.

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