Economics in Nursing

Economics is present in and has effects on everything. This is because economics covers such a wide range of subtopics. Not only does the science deal with what people buy and sell, it also describes how people interact with one another in non-monetary ways. It's important to understand a few of the ways in which nursing interacts with economics.

Employment Supply and Demand

• As of 2011, nursing was a reasonably well-paid job, with RNs making an average of $33 an hour in California, for example. This is because of supply and demand. As the population ages and more people need health care, the demand for nurses is increasing. This increases the "price" of an hour of a nurse's time, as people require an economic incentive to come to work. Because fewer qualified nurses exist than jobs for them, they need to be attracted with high wages.

  This is a classic example of the law of supply and demand. If more people study nursing based on these high salaries, the supply of nursing labor will increase, thus decreasing the price. If, on the other hand, demand increases faster than supply, the hourly wage will increase as competition for qualified nurses also increases.

Subsidies

• Another economic principle involved in nursing is the effect of subsidies. When the government or other large institution funds nursing students' education (which is increasingly common because of the low supply of nurses), the market is skewed. This is because there is a contingent of nurses who paid for their education and therefore need to charge higher wages, but a contingent of nurses who did not pay for their education therefore don't need to charge as much in order to pay for it.

  This means that the presence of a third party in the supply/demand equation is skewing the value of labor. Because prices are set on an aggregate basis, the nurses who paid for their education are forced to settle for marginally less than they otherwise would have. The nurses who did not pay, on the other hand, are paid marginally more than they need to fund their education. The overall result is that nobody is getting what the market actually determines her to be worth.

Incentives

• Economics also affects nurses' individual decisions. For example, shifts are often paid at different rates depending on when they are scheduled, how difficult they are and other factors. Rapides Regional Medical Center in Alexandria, Louisiana, for example, pays its nurses 25 percent more in exchange for working on the weekend.

  This creates a classic opportunity cost decision. A nurse can make more money by working on the weekend, but he has to weigh that against intangibles, such as the fact that most social events happen on weekends. The extra 25 percent, like everything, comes at a cost, such as missing a social baseball game, and the nurse needs to consider that when he decides to work.

Elasticity of Supply

• Elasticity of supply is an economic term that describes the fact that supply of a product is sometimes subject to factors such as price, but other times it is not. It also describes the extent to which supply is elastic or inelastic.

  Nursing labor is a fairly elastic product. This means that as wages increase, the number of nurses available also increases. The elasticity for nurses, according to David M Blau, is 1.1, meaning a 10 percent increase in wages will result in 1 percent increase in the number of nurses available.

  This doesn't seem like much, but many careers have much lower elasticity, with doctors clocking in at a paltry 0.3. This shows the flexible, accessible nature of nursing and how it is affected by the economy as a whole.