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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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Paper provided by East Carolina University, Department of Economics in its series Working Papers with number 9604.

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Handle: RePEc:wop:eacaec:9604

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References

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  1. Robert Gibbons & Lawrence F. Katz, 1989. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc.
  2. 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.
  3. DuMond J.M. & Hisch, B.T. & Macpherson, D.A., 1996. "Wage Differentials Across Labor Markets and Workers: Does Cost of Living Matter?," Working Papers 1996_08_01, Department of Economics, Florida State University.
  4. 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.
  5. 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.
  6. Barry T. Hirsch & Edward J. Schumacher, . "Union Wages, Rents, and Skills in Health Care Labor Markets," Working Papers 9721, East Carolina University, Department of Economics.
  7. 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.
  8. Hirsch, B.T. & Schumacher, E.J., 1993. "Monopsony Power and Relative Wages in the Labor Market for Nurses," Working Papers 1993_06_03, Department of Economics, Florida State University.
  9. 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.
  10. 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.
  11. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  12. 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.
  13. 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.
  14. Kostiuk, Peter F, 1990. "Compensating Differentials for Shift Work," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1054-75, October.
  15. 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.
  16. 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.
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Citations

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Cited by:
  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. Hamermesh, Daniel S., 1999. "Crime and the Timing of Work," Journal of Urban Economics, Elsevier, vol. 45(2), pages 311-330, March.
  3. Michael J. Dueker & Stephen J. Spurr & Ada K. Jacox & David E. Kalist, 2005. "The practice boundaries of advanced practice nurses: an economic and legal analysis," Working Papers 2005-071, Federal Reserve Bank of St. Louis.
  4. Daniel S. Hamermesh, 1999. "Changing Inequality In Markets For Workplace Amenities," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1085-1123, November.
  5. Barry T. Hirsch & Edward J. Schumacher, 2012. "Underpaid or Overpaid? Wage Analysis for Nurses Using Job and Worker Attributes," Southern Economic Journal, Southern Economic Association, vol. 78(4), pages 1096-1119, April.
  6. 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.
  7. 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.
  8. James Peoples & Bin Wang, 2007. "Privatization and Labor Cost Savings: Evidence from Health Care Services," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(2), pages 145-157, June.
  9. Lanfranchi, Joseph & Ohlsson, Henry & Skalli, Ali, 2001. "COMPENSATING WAGE DIFFERENTIALS AND SHIFT WORK PREFERENCES. Evidence from France," Working Papers in Economics 55, University of Gothenburg, Department of Economics.
  10. Sæther, Erik Magnus, 2009. "Compensating differentials for nurses," HERO On line Working Paper Series 2004:10, Oslo University, Health Economics Research Programme.
  11. Edward J. Schumacher, . "Relative Wages and the Returns to Education in the Labor Market for Registered Nurses," Working Papers 9720, East Carolina University, Department of Economics.
  12. 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 On line Working Paper Series 2004:9, Oslo University, Health Economics Research Programme.
  13. Edward J. Schumacher, . "The Earnings and Employment of Nurses: Evidence from the 1990s," Working Papers 9803, East Carolina University, Department of Economics.
  14. Sæther, Erik Magnus, 2009. "Wage Policies for Health Personnel - Essays on the Wage Impact on Hours of Work and Practice Choice," HERO On line Working Paper Series 2005:1, Oslo University, Health Economics Research Programme.

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