The United States is facing a severe nursing shortage. Already, an estimated 8.5 percent of U.S

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BUSINESSWEEK CASE: A Critical Shortage of Nurses

The United States is facing a severe nursing shortage. Already, an estimated 8.5 percent of U.S. nursing positions are unfilled—and some expect that number to triple by 2020 as 80 million baby boomers retire and expand the ranks of those needing care. Hospital administrators and nurses’ advocates have declared a staffing crisis as the nursing shortage hits its 10th year.

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So why aren’t nurses paid more? Wages for registered nurses rose just 1.34 percent from 2006 to 2007, trailing well behind inflation. The answer is complicated, influenced by hospital cost controls and insurance company reimbursement policies. But another factor is often overlooked: Huge numbers of nurses are brought into the United States from abroad every year. In recent years nearly a third of the RNs joining the U.S. workforce were born in other countries.

Critics say this is a short-term solution that could create long-term problems. The influx of non-U.S. nurses allows hospitals to fill positions at low salaries. But it prevents the sharp wage hike that would encourage Americans to enter the field, which could solve the nursing shortage in the years ahead. “Better pay would signify to society that nursing is a promising career,” says Peter Buerhaus, a professor of nursing at Vanderbilt University. “It’s a critical factor in building the workforce of the future.”

The U.S. market for nurses is a reflection of how labor markets can change with globalization. With new technology and the increasing movement of workers, labor markets are no longer local or even national. Supply and demand don’t work quite as they did in the past. Shortages in one market aren’t corrected with higher prices if supply comes from another.

Pay isn’t the only issue. Difficult working conditions and understaffing also deter qualified people from pursuing the profession. But average annual wages for registered nurses (one of the most highly trained categories) is now just under $58,000 a year, compared with a $36,300 average for U.S. workers overall. And it’s clear that qualified American nurses see that as not enough: 500,000 registered nurses are not practicing their profession—one-fifth of the current RN workforce of 2.5 million and enough to fill current vacancies twice over.

 

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