Over the years the Ragnar Frisch Centre for Economic Research has built a database covering the entire Norwegian Population aged 16-69. I have matched this database with the register of licensed health personnel and an administrative register of wages and working time for health personnel employed by institutions organized by
NALRA. The registers are collected by various public agencies and provided by Statistics Norway. The Norwegian Social Science Data Services (NSD) has provided a centrality index for the municipalities.
The register data provide an opportunity for rich data analysis and all papers are based on these. The measurement error is reduced dramatically with access to detailed personnel administrative data records like the NALRA register. Each individual record comprises demographic information (age, gender, country of birth, marital status, etc.), education, specialization, income, employment status, industry code, practice type, and also hours of work, wages and shift type for public employees. I have also matched information about spouse and children with each health worker.
22 8. Summaries and main conclusions
The Wage Impact on Physicians’ Labor Supply and Practice Choice.
In most countries the health authorities try to influence the physicians’ choice of specialization, practice type and working hours. Regulations through quotas have been widely used in countries with a national health service (NHS). With the deregulation of health markets, incentives such as the physicians’ pay and practice income play a relatively larger role in the implementation of health policies. The purpose of this paper is to analyze how economic incentives affect the labor supply of physicians. I do this by estimating the effects of increased wages on the physicians’
total working hours, and their preferred combination of hours in their main job and hours in an extra job or private practice.
A combination of jobs is common for physicians, and it is important to focus on the job mix as it seems reasonable to assume that physicians work differently in public and private services, facing different sets of incentives and budget mechanisms. The interaction between the main job and the extra job is also interesting. An efficient implementation of the health priorities will thus embrace preferences of practice forms, including a preference of whether a consultant should spend his/her spare time working extra hours in a public facility or in a private practice.
In most OECD countries physicians are partially or fully publicly funded while practicing, by wage in the public sector and through financial contracts with private providers. Health authorities justify the funding with their responsibility to ensure that the population has access to health services. Yet many countries suffer from personnel shortages in general or within certain practice types and specialties. With a view to informing the policymaking process, the task of this paper is thus to identify the effects of increased wages on physicians’ working hours and sector choices.
To analyze this question I apply a static neo-classical structural labor supply model with utility maximizing individuals. The model is inspired by approaches like that of Aaberge, Dagsvik and Strøm (1995). Relying on a discretization of the choice
structure, I present an econometric framework that allows for non-convex budget sets, nonlinear labor supply curves and imperfect markets with institutional constraints.
The physicians are assumed to make choices from a finite set of job possibilities, characterized by practice form, hours and wage rates. The individuals may combine their main position with an extra job (or private practice), making a variety of combinations of hours possible for each job. I take into account the complicated payment schemes for physicians, as well as taxes and household characteristics when estimating labor supply on Norwegian micro data. The results show a modest
response in total hours to a wage increase, but a reallocation of hours in favor of the sector with increased wages. The predictions are evaluated by means of a ‘natural experiment’; a policy reform significantly increasing hospital wages.
The analysis presents two types of settings. One with four possible practice types:
hospital, municipal primary care, private practice and other jobs like public
administration, NGOs, occupational health and private businesses that is not directly patient related. The other setting focuses on the hospital physicians and their choice between overtime work at the hospital or working in a private practice as an extra job.
Will increased wages increase nurses’ working hours in the health care sector?
Whereas physicians traditionally work many hours per week, registered nurses often work part-time, at least during the years they have small children. In Norway there has also been some attention focused on RNs who are not working in the health sector and how one can motivate them to return to patient related work. The nurses’ trade organizations claim that a wage increase will increase the short-term labor supply in the health care sector. This paper is an application of the framework presented above to identify the effects of job type-specific wage increases on the RNs practice type and hours through policy simulations on micro data.
As for the physicians the individual’s labor supply decision can be considered as a choice from a set of discrete alternatives (job packages). These job packages are characterized by attributes such as hours of work, sector specific wages and other
24
much less common for RNs. The nurses choose the job package that maximizes their utility given a nonlinear budget set that incorporates taxes. The three sectors or job types are public hospitals, public primary care services and other “non-health” or
“non-patient” jobs within public administration, private businesses and NGOs.
I undertake the analysis for married and single female RNs separately, as there is reason to believe that the two groups respond differently to financial incentives. For married females the results indicate job type specific wage elasticities for hours of work of 0.17 in hospitals and 0.39 in primary care. The total hours worked in health and non-health jobs combined are actually predicted to be slightly reduced, but the change is not significantly different from zero. Single females are somewhat more responsive to wage changes than married ones.
I do not analyze the impact of wage increases as an instrument to mobilize those not working. One argument for not including this group is the differences in personal characteristics compared to those working. Another is the relative small number of RNs not working, making the framework presented less suitable.
Nurses’ labor supply with endogenous choices of care level and shift type.
A nested discrete choice model with nonlinear income.
One weakness of the analysis of the nursing labor market as presented above is the disregard of the shift dimension, an important characteristic when RNs make their job choice. This paper explicitly includes shift choice in the analysis, but the sample is limited to the public health sector due to data restrictions. Where the preceding nursing paper addresses the possibility of attracting RNs to the health sector from other non-health jobs, this paper focuses on the job-choices and working hours of those already working in the health sector. The reason is that shift information is only included in the NALRA register, which covers hospitals and primary care institutions owned by local authorities.
Shift work has a documented negative impact on workers’ health and social life, effects that are compensated for with higher wages and shorter working hours. Many
countries face a ‘nursing shortage’, and increasing wages is argued to lead to an increase in the short-term labor supply in the health care sector . Omitting shift work in the evaluation of such policies may lead to biased estimates of the wage elasticities.
This paper presents an econometric analysis that allows the nurses to compose their
‘job package’ in three steps by choosing: a) hospital or primary care, b) daytime or shift work and c) one of four categories of hours. The utility maximization problem is solved by discretizing the budget set and choosing the optimal job package from a finite set of alternatives.
There is some variation in the responsiveness to wage between shift and day workers and by care level. The job-specific elasticities are small but positive. However, the simulation of a wage increase in all job types when conditioning the analysis to those already participating in the sector, indicates a slight reduction of hours. Thus, the income effect seems to be dominating in the labor supply of nurses.