July 26, 2007

Nurse pay

This one is just a brain workout.

Statastic posted an interesting article on the predicted registered nurse (RN) shortfall (link in title). The rundown is that, yes, the RN population is aging, but this isn't a problem since the market has reacted by driving up average RN pay by 12.8% from 2000 to 2004 in real terms (i.e. inflation-adjusted). This should attract more people to the nursing profession, and so the shortfall will not materialize.

Unfortunately, as Statastic points out but does not calculate, an more experienced RN makes more money, so part of the rise in real wages can simply be due to aging. Can this be corrected for? Not easily. Statastic relies on the preliminary findings of the 2oo4 National Sample Survey of RNs. The full findings are now available. The average age of the nursing population went from 45.2 years in 2000 to 46.8 years in 2004. 1.6 years doesn't sound like an awefully big change, but it is about one or two payraises. It is, however, very difficult to translate this added experience into dollar amounts, and I have not found a handle on it yet. It would greatly surprise me if the added experience wouldn't add at least 1% to the average salary. But there are other reasons for the large increase in RN pay.

One reason , which Statastic didn't notice, is that nurses work longer hours. In hospital settings, nurse workweeks went from 42.4 to 43.9 hours, fully 1.5 hours per week longer, a 3.5% increase. Other nursing positions had similar hour changes. So part of the increased earnings is simply due to longer workweeks.

And there is more. Not only is the RN population getting older, it is also getting much better educated. The number of RNs that have a masters or doctor's degree is up 37% from 2000 to 2004, a drastic change. The data show that RNs with a masters degree make on average over 74,000 USD, and those with a doctorate make on average over 80,000. That is 30% over the average RN pay. With 12.8% of RNs now having an advanced degree, this increase of 2.4% over 2000 caused the average pay to increase by about .8% (in real terms).

Between the additional experience, education and longer working hours, I think that about 5 to 6% of the average raise in pay can be explained by real improvement in the service offered. That means that the scarcity of RNs "only" increased their pay about 7% or so. Still nothing to sneeze at. The number of active RNs went up about 10% from 2.2 to 2.4 million between 2000 and 2004. At the same time, the population grew about 5%, so the situation is improving.

Kudos to Statastic, whose article inspired me.

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