A Critical Shortage of Nurses

Low pay for a grueling job keeps many Americans out of the field—and that spells trouble as baby boomers age

by Moira Herbst

This story is the second in a series examining the state of the U.S. labor market.

The U.S. is facing a severe nursing shortage. Already, an estimated 8.5% of the nursing positions in the U.S. are unfilled—and some expect that number to triple by 2020 as 80 million baby boomers retire and expand the ranks of those needing care. Hospital administrators and nurses' advocates have declared a staffing crisis as the nursing shortage hits its 10th year, the longest stretch in 50 years.

So why aren't nurses paid more? Wages for registered nurses rose just 1.34% from 2006 to 2007, trailing well behind inflation. The answer is complicated, influenced by factors from hospital cost controls to insurance company reimbursement policies. But another factor is often overlooked: Huge numbers of nurses are brought into the U.S. from abroad every year. In recent years nearly a third of the RNs joining the U.S. workforce were born in other countries.

Critics say this is a short-term solution that could create long-term problems. The influx of non-U.S. nurses allows hospitals to fill positions at the low salaries they prefer to pay. But it prevents the sharp wage hike that would encourage Americans to enter the field, which could solve the nursing shortage in the years ahead. "Nurses' wages need to be higher," says Peter Buerhaus, a professor of nursing at Vanderbilt University and an expert on the U.S. nursing workforce. "Better pay would signify to society that nursing is a promising career. It's a critical factor in building the workforce of the future."

The Effects of Globalization

The market for nurses in the U.S. is a reflection of how labor markets can change with globalization. With new technology and the increasing movement of workers, labor markets are no longer local or even national. Supply and demand don't work quite as they did in the past. Shortages in one market aren't corrected with higher prices if supply comes from another.

These labor shortages can happen in fields as diverse as medicine, construction, farming, and technology. One of the most contentious debates over the labor market is playing out in the technology industry. As U.S. tech companies hire more programmers and developers from overseas, American workers complain of the impact on their compensation. Meanwhile, companies such as Microsoft (MSFT), IBM (IBM), Google (GOOG), Oracle (ORCL), and Motorola (MOT) have been arguing that the U.S. should let in even more skilled workers from abroad, both on a temporary and permanent basis. But computer scientists and software developers say such moves would discourage American workers from pursuing these specialties and hurt U.S. competitiveness in the long term (see BusinessWeek.com, 2/8/07, "Work Visas May Work Against the U.S.," and 3/27/07, "Immigration Reform: Americans First?").