The Earnings and Employment of Nurses in an Era of Cost Containment

Previous research has shown that from the 1980s through the early 1990s, nurses enjoyed substantial wage and employment gains that stemmed, to some extent, from increased labor demand. Using individual data for 1988–98 to compare nurses' fortunes with those of college-educated women and other workers in the health care industry, the author documents that nurses experienced a decline in real wages beginning in the early 1990s, at the same time that the skill premium for RNs, as reflected by the return to education and experience, was increasing. Changes in measured characteristics and their returns explain very little of the decline, consistent with the theory that the relative wage decrease was driven by a decline in the demand for RNs and increased cost constraints. The effects of HMO penetration are found to explain only a small part of the variation in wages across metropolitan statistical areas and across time.