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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, "undated". "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.
  • Handle: RePEc:wop:eacaec:9604
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    References listed on IDEAS

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    1. Barry T. Hirsch & Edward J. Schumacher, "undated". "Union Wages, Rents, and Skills in Health Care Labor Markets," Working Papers 9603, East Carolina University, Department of Economics.
    2. 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 426-471, July.
    3. 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.
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    5. Kostiuk, Peter F, 1990. "Compensating Differentials for Shift Work," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1054-1075, October.
    6. 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.
    7. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-1059, October.
    8. Erica L. Groshen & Alan B. Krueger, 1990. "The Structure of Supervision and Pay in Hospitals," ILR Review, Cornell University, ILR School, vol. 43(3), pages 134-1-146-, April.
    9. Robert Gibbons & Lawrence Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 515-535.
    10. 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 577-598, October.
    11. 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.
    12. 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.
    13. 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 1333-1381, September.
    14. 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 835-858, August.
    15. Roger Feldman & Richard Scheffler, 1982. "The Union Impact on Hospital Wages and Fringe Benefits," ILR Review, Cornell University, ILR School, vol. 35(2), pages 196-206, January.
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    Cited by:

    1. Edward J. Schumacher, "undated". "The Earnings and Employment of Nurses: Evidence from the 1990s," Working Papers 9803, East Carolina University, Department of Economics.
    2. 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.
    3. Sæther, Erik Magnus, 2009. "Compensating differentials for nurses," HERO On line Working Paper Series 2004:10, Oslo University, Health Economics Research Programme.
    4. Hamermesh, Daniel S., 1999. "Crime and the Timing of Work," Journal of Urban Economics, Elsevier, vol. 45(2), pages 311-330, March.
    5. 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.
    6. 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.
    7. Lanfranchi, Joseph & Ohlsson, Henry & Skalli, Ali, 2002. "Compensating wage differentials and shift work preferences," Economics Letters, Elsevier, vol. 74(3), pages 393-398, February.
    8. 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.
    9. Daniel S. Hamermesh, 1999. "Changing Inequality in Markets for Workplace Amenities," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1085-1123.
    10. 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.
    11. 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.
    12. 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.

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