Nurse Shortage May Signal Era of Salary Gains

A nursing shortage that has been causing havoc in hospitals nationwide is providing a glimpse of what lies ahead for the service sector in particular, and the U.S. economy in general, as the labor force shrinks.

In California, as elsewhere, the shortage is driving up nurses’ pay. That trend suggests that the American family may be poised to break out of 16 years of stagnant income growth.

Higher wages, however, could lead to higher inflation rates unless accompanied by improved productivity. Achieving that productivity may require additional flexibility on the part of labor and management--an issue that the health-care industry is only beginning to address.

Parallel Not Apparent

“The nursing shortage is an excellent example,” said Frank Levy, author of a landmark study of American family income in the postwar era, although he warns that the rising-income scenario is not guaranteed. “It’s even money,” he said.

Some economists are less convinced of the parallel. “Nursing supposedly has been in that (shortage) position for the whole decade,” said Larry Mishel, research director for the Economic Policy Institute, a liberal think tank in Washington, D.C. But nurses’ wages have not gone up that much around the country, he added.

In fact, the move toward higher wages may only be starting.

Nationally, nurses’ average maximum salary went up 6.2% last year--the largest raise for nurses ever recorded on an inflation-adjusted basis. California nurses, who have a stronger union and are located in a dynamic economy, are doing even better.

“We are really moving by leaps from each contract to the next,” said Maureen Anderson, a spokeswoman for the California Nurses Assn. In one landmark contract last August, San Francisco nurses went on strike for one month and came back to a contract with a 21% increase in pay over two years.

Likely to Spread

Demographers and employers expect the labor shortages to spread to other industries in the 1990s. That’s because business continues to expand while the number of young people entering the work force is shrinking--the so-called “Baby Bust” generation.

In theory, fewer workers will force employers to pay higher wages. Economists such as Levy are paying special attention to these workers to see if they will produce more as they earn more. If that happens, then they are setting the stage for better times. If they don’t, then inflation will eventually eat up their wage gains.

Since World War II, the American family has seen both sides of the coin.

In 1950, Levy said, inflation was low and pay increased steadily. Even after adjusting for inflation, the average 40-year-old man in 1950 could look forward to his income rising 36% by the time he reached 50. In 1960, the average 40-year- old could look forward to a 25% rise in pay. But in the 1970s, inflation began to wreak havoc on incomes. The average 40-year-old in 1973 would have seen his income fall 14% by 1984.

Critics of Levy’s study have pointed out that his measure of inflation overstated its effect. And the economy has improved since 1984. Still, subsequent research has confirmed that family incomes in the United States have stagnated since 1973. The Congressional Budget Office earlier this year pointed out that the average middle-income family earned $23,455--or $86 less than it did in 1973, after adjusting for inflation.

The key difference between the periods of income growth and stagnation was productivity, economists say. From 1950 to 1973, the output per U.S. worker increased an average 1.9% a year, according to a study by Robert Lawrence of the Brookings Institution. From 1973 to 1979, output declined an average 0.2% a year, then rose again by an average 0.8% from 1979 to 1987.

The productivity gains since 1979 have occurred in manufacturing. Battered by competition from imports, U.S. manufacturers in the 1980s revamped their workplaces and started using their labor more efficiently.

Reaction Uncertain

The question facing the nation is whether the coming worker shortage will shock the service sector into action, just as foreign competition galvanized manufacturers.

Judging from the nursing shortage, the answer so far seems to be no. Despite healthy pay increases at the UCLA Medical Center, for example, nurses complain that hospital management has not tackled the real questions of efficiency.

“They should use us more efficiently,” added Richard Brahm, another staff nurse and union activist. “We are still doing all this ancillary stuff.”

For example, Brahm, a $20-an-hour nurse near the top of the UCLA pay scale, said he often has to go to the pharmacy to fill a prescription or restock carts of medical supplies--jobs that could be done by lower-paid support personnel.

“The nurses are right. They shouldn’t have to do these things,” said Margaret Neill, associate director of the center’s hospitals and clinics. Slowly, the situation is changing, she added.

Under a 3-month-old pilot program, two units in the medical center have teamed support personnel with nurses. As a result, the support workers’ productivity has jumped 30%. The program will probably be expanded, Neill added.

Still, nearly everyone agrees that hospitals are at the beginning of productivity improvement, not the end. Last year, for example, a federal commission on the nursing shortage devoted seven of its 16 recommendations to improving nursing productivity and enhancing nurses’ decision-making.

“Are nurses being used correctly, I think, is a key issue,” added Dana Dwinnells, director of the American Hospital Assn.’s nursing center. Solutions to the nursing shortage remain elusive. “I think it would be manageable in two years if everybody gets their heads together and works at it.”

The problem is that labor and management often work at cross-purposes. Nursing groups object to hospitals’ hiring lower-paid registered-care technicians, in part because they fear that a new class of workers would erode their bargaining power. Hospitals say they cannot afford to improve pay and benefits of full-time nurses--then they fill vacancies with temporary nurses, who cost much more than full-time registered nurses.

The power struggle developing between hospitals and a new generation of nurses is reminiscent of the kind of adversarial labor-management relations that were common on the factory floor two decades ago. Union membership in the California Nurses Assn. has shot up 63% since 1980.

Staffing Reorganized

There are examples of cooperation. For the last several years, the Johns Hopkins Hospital in Baltimore has reorganized its staffing on a cooperative model. Decision-making is pushed to the lowest possible level. Nurses, for example, make their own scheduling decisions. Productivity has risen significantly.

In its bid to ease the shortage in New York, the state health department is looking to study and publicize those hospitals that have found new ways of boosting productivity.

“We really feel there’s a lot of room for improvement,” said Vida Behn, an associate health planner in the department’s planning division. “The more nurses cost, the more conscious facilities will be in using them and the more creative they will be in using them. (But) it takes awhile for a system as complex and as steeped in traditional roles as the health-care industry tends to be to move away from the status quo.”