Covid-19 surges have led to spikes in demand for short-term nurses across the United States. A new paper finds nurses travel longer distances, and are more likely to leave their home state, when compensation is higher.
Surges in the Covid-19 pandemic have repeatedly led to fears of hospital staffing shortages. As case counts increase, we are seeing widespread reports of hospitals unable to find enough nurses to treat all of their Covid-19 patients, on top of all of their usual patients. In a recent Becker-Friedman Institute working paper, my coauthor and I study how the nursing labor market copes with these surges.
This setting also provides us with an opportunity to learn about the fascinating economics of contingent workers—i.e.,those with non-traditional employment relationships. Hospitals regularly hire short-term nurses through staffing agencies to fill short-term staffing needs. Just as the much-hyped “gig economy” matches temporary jobs with an ever-changing supply of workers, hospitals need to bolster their workforces during flu season or when their regular staff are unavailable. The travel nursing market is one way hospitals fill these gaps. It was in place when the pandemic arrived, and positioned to arrange matches between hospitals needing nurses and nurses looking for jobs.
We used this market to study the flexibility of nurse supply across the US. We obtained data from Health Carousel, a health care staffing firm, on nurse job postings including the job’s location, compensation offered, and specialty. For jobs that Health Carousel filled, we also learn where the nurse comes from. These data allow us to study how nurse supply responds to compensation, and how it is that the market can accommodate changes in demand.
We find that job postings for temporary nurse positions tripled from their usual rate at the height of the pandemic’s first wave, and increased even faster in places facing extreme pandemic conditions. In New York State, job postings increased eightfold, while the compensation almost doubled. Looking across states broadly, there is a clear pattern of higher compensation in states with larger Covid-19 burdens. And looking within states over time, both compensation and job postings respond strongly to contemporaneous Covid-19 diagnoses.
The differences across states and across nursing specialties allow us to estimate how flexible nurses’ supply and job choices are in this market. For example, there was little-to-no increase in wages for nurses working in labor and delivery units, as the first wave of the pandemic did not change the number of women who were already pregnant. In contrast, demand skyrocketed for nurses in intensive care units (ICU) and emergency rooms (ER)—the specialties most involved in Covid-19 treatment. For these specialties, the number of job openings and compensation rates are positively associated with state-level Covid-19 case counts. In other words, more acutely ill Covid-19 patients implies increased need for traveling nurses, and higher payments required to recruit them. Based on one estimate, ICU jobs increased by 239 percent during the first wave of the pandemic, while compensation increased 50 percent. ER jobs increased by 89 percent while compensation increased by 27 percent.
The large size of the US, and nurses’ ability to work in different states, appears to be an important part of how this market adapted to the first waves of demand for Covid-19 nursing. To see this, we compare the supply elasticity estimated from the overall national market with the elasticity we estimate across states at a given point in time. While both elasticities are quite large—implying a lot of flexibility in this market—the cross-state response is larger. This lines up with standard economic intuition: it is easier to induce nurses to switch between jobs once they’re already in the market than it is to induce nurses into the labor force, or into travel nursing overall.
Whether at the state or the national level, the broad takeaway is that supply in this market is very elastic—that is, nurses are quite flexible in their willingness to enter the market and to go where they are needed. This is not surprising given the nature of the market: the travel nursing market emerges specifically because nurses are interested in short-term jobs, and hospitals have short-term staffing needs to fill. So it makes sense that this sort of market for transitory work would have rather elastic supply. The upshot is that price signals are an effective way of reallocating nurses to the parts of the country with increased staffing needs.
To understand why this is the case, we delve into the data on which nurses accept which jobs. We find that nurses travel longer distances, and are more likely to leave their home state, when compensation is higher. This compensation, in turn, responds to the level of Covid-19 in an area. When the pandemic increases demand for travel nursing, the market responds by raising wages. This induces nurses to take less convenient jobs—whether out of state or farther away. This adaptation is reasonably easy, which is why supply appears so elastic.
This work suggests that a national staffing market may offer timely flexibility to accommodate demand shocks. When demand increases in specific geographic areas, nurses’ ability to move can help mitigate a local shortage.
But adjusting to a simultaneous national demand shock is harder. If numerous different regions experience simultaneous Covid-19 surges, meeting demand may require more than mobility across regions. Even though some nurses can travel, there is still a limited national supply of those with skills in demand. So a simultaneous national surge in demand requires inducing more nurses into the market overall. This could mean increased hours for existing nurses, retirees returning to the labor force, training for new specialties, or recruiting immigrant nurses from overseas. But all of these responses involve bigger changes than traveling to one state versus another. So it’s quite natural that the market would require higher prices in order for this total to adjust.
This raises a serious challenge for the upcoming winter. When Covid-19 arrived in spring, the worst spikes were limited to a few specific locations. Over the summer, a different set of states experienced large surges. But now the pandemic appears to be surging across many regions simultaneously. This limits the adjustment margins available to the market; reallocating nurses across states doesn’t increase the total number of nurses available. So a nationwide demand shock is likely to require larger compensation growth to accommodate the rapidly increasing demand for medical staff.
Taking a broader perspective, our work shows that standard economic forces are key for understanding short-term staffing markets. Supply is quite elastic, and even more when workers are moving across jobs rather than entering the labor market. A sudden demand shock can be accommodated in an environment with elastic supply, through higher compensation that moves along workers’ supply curves.