The Impact of Pay Increases on Nurses' Labour Market

Abstract

Nurses are usually the most numerous professionals in the healthcare workforce, and their contribution is a core component in attaining the policy objectives of improved productivity, quality of care and effectiveness in the health sector. The recent global economic crisis, and its related impacts on health sector funding and health labour market dynamics, has reinforced these policy priorities. This report reviews the impact of pay increases on nurses’ labour market indicators. It presents background data on trends in the numbers of nurses and the remuneration of nurses in OECD countries; summarises the limited evidence base on pay and labour market behaviour; reports on four case study countries where a significant pay raise was awarded to at least some categories of nurses in recent years in response to perceived labour market challenges – the United Kingdom (UK), New Zealand, Finland and the Czech Republic – using a variety of indicators to illustrate impact; and concludes with key points for policy makers. There has been variable growth in nurses’ employment levels in OECD countries in recent years, and nurses’ pay rates, in comparison to other earnings in national economies, vary markedly across OECD countries. The country case studies in this report highlight that there were several main drivers for the implementation of a pay rise for nurses, and also identified a range of possible indicators that can be used to assess the impact of changes to nurses’ pay. The main impetus for a pay increase came from: labour market concerns (geographic or specialty shortages), which were reported in all four countries; pay equity issues (New Zealand and the UK); structural changes in the pay systems (e.g., increased flexibility) (Finland, New Zealand and the UK); attempts to improve organizational productivity and the quality of care (UK); and improving international pay competitiveness (Czech Republic after EU accession). The review concludes by arguing that how nurses are paid - as well as how much they are paid – is an issue worthy of more detailed examination. While the same policy drivers exist in most OECD countries, nurses’ pay systems are very different. The findings suggest that, in the short term at least, the pay increases in the four countries contributed to an increase in the potential “new” supply of entrants to nurse education; the effect on those already in work is more difficult to assess, as their behaviour is also impacted by the complex interaction of other aspects, such as working environment and working conditions, career possibilities, and individuals' priorities.