Nursing: Labor Market Research

Wages in the profession of nursing vary widely from state to state. There are many factors that play a part in the difference in wages between states. However, for the purpose of this paper I will focus on the labor market for nurses in the state of California. First, I will address the factors that affect labor supply and demand in this labor market. Next, I will determine how wages are determined and the salary structure for a nurse. Finally, I will determine what the state if California can do to increase the supply of nurses.

Supply and Demand Factors

There are many factors that affect supply and demand in the labor market for nurses. California has a high demand for nurses and there a couple of obvious factors that have caused this high demand. In 2004 California passed a law requiring hospitals to have a nurse to patient ratio of one to five (Rickles, n.d.). This factor of legislation consequently increased the demand for nurses in California. In addition to this new law the increasing population in California also increases the demand for nurses in the state because as more people seek medical care more nurses are demanded (Rickles, n.d.).

The factors that affect supply in the labor market for nurses are not as specific to California but are factors that affect many states. For instance one factor that affects supply is the time it takes to get the education needed to become a nurse. The fact that the nursing profession requires a license makes this profession more restricted than others (Rickles, n.d.). This factor relates to the first principle of economics which is "people face tradeoffs" (Mankiw, 2004). Some people may not enter nursing programs because they may decide that they could make more money if they worked full-time rather than working part-time and going to school part-time. Additionally, many nursing programs do not have much space available in classes causing these programs to reject qualified applicants (Institute for Women's Policy Research, 2006). Next, I will discuss how a nurse's pay is determined and how the salary is structured.

Determination of Nurse's Pay and Structure

A nurse's pay is determined by the labor supply and demand of the labor market as it is in other professions but there are some factors that make the labor supply and demand slow to respond to the needs of the labor market. When a hospital faces a shortage of nurses the market equilibrium affect would be an increase in wages in a typical competitive market. Once wages increase the employer would want to find a way to lower labor costs. However, in the labor market for nurses, Rickles (n.d.), states that "significant changes in the local nursing supply might not occur immediately because of the lag between a person's decision to become a nurse and the time it takes to complete the required education" (p.111). Additionally, legislation such as nurse to patient ratios place restrictions on the amount in which demand can shift.

Salary structure for nurses in California is based on many different factors. The place of employment, region of employment, experience, level of education, and area of specialization are all factors that can affect the amount of salary a nurse receives for her work. According to the County of San Bernardino Department of Workforce Development (2008), entry level registered nurses in California were paid $29.52 per hour or $61,415.50 annually, while experienced registered nurses in California were paid $43.33 per hour or $90,118.45 annually.

What can California do to Increase the Supply of Nurses?

The problem of a shortage of nurses in California brings into to play the seventh principle of economics, which is "government can sometimes improve market outcomes" (Mankiw, 2004). In this case the government needs to step in allocate more funds to the schools that train nurses. This funding will allow nursing programs to accept more students and a result would be a larger supply of nurses. Additionally, I think that if legislation is to be passed that increases the nurse to patient ratio then the government should also help hospitals with the labor costs associated with this legislation.

In conclusion, California has a very large labor market for nurses; however, there are many factors which do not allow the labor supply to keep up with the labor demand. These factors cause problems for the balancing of the labor supply and demand, which in turn affect the equilibrium of the market. For this reason the government must step in and guide this labor market by providing funding to schools and hospitals so that the labor supply can overcome this shortage of nurses in California.To know more, you can also visit prescottpapers


County of San Bernardino Department of Workforce Development. (2008). Labor market wages for registered nurses. Retrieved February 28, 2009, from http://www.csb-win.org/occprofiledata.asp?session=occdetail_lms geo;=0601000000 emp;=

Institute for Women's Policy Research. (2006). Solving the nursing shortage through higher wages. Retrieved February 27, 2009, from http://www.iwpr.org/pdf/C363.pdf

Mankiw, N. G. (2004). Principles of economics (3rd ed.). Chicago, IL: Thomson South Western.

Rickles, J. (n.d.). California Policy Options: Supplying California's need for Nurses. Retrieved February 27, 2009, from http://www.spa.ucla.edu/calpolicy/files05/PolicyOptions_NursingPaper_v2edit.pdf