Rising Wages for Nurses? Nanny State to the Rescue

[Guest guest]

http://www.truthout.org/docs_2006/052406A.shtml

 

 

Rising Wages for Nurses? Nanny State to the Rescue

By Dean Baker

t r u t h o u t | Perspective

 

Wednesday 24 May 2006

 

The New York Times had an article today that inadvertently

revealed a huge amount about how wages are set in the US economy ( " US

Plan to Lure Nurses May Hurt Poor Nations, " 5-24-06; A1). We all know

the official story - wages are supposed to be set by the market, our

old friends supply and demand. When certain skills are in short

supply, the wages for workers with these skills are bid up. This leads

more people to acquire the skills and may also reduce the demand.

Eventually, supply increases and demand falls by enough to establish a

balance in the market.

 

In this wonderful market world, the people who end up with high

wages (e.g. doctors, lawyers, accountants, economists) have skills

that are in high demand and difficult to master. The people with low

pay (e.g. custodians, retail clerks, child care workers, dishwashers,

etc.) are ones who have skills that are relatively plentiful.

 

That is a nice fairy tale. It has about as much relationship to

the real world as the tooth fairy, as the Times article showed.

 

The article reports on a provision in the Senate immigration bill

that removes the cap on the number of nurses who can enter the country

each year. The problem, as described in the article, is that the

country faces a large and growing shortage of nurses. In a market

economy, a shortage means that wages should rise. This will cause more

students to enter nursing schools (presumably creating more incentive

to establish nursing schools), and will induce many part-time or

retired nurses to work more hours as nurses. It may also curtail the

demand somewhat, as some tasks that are performed by nurses can

presumably be performed by less-skilled workers.

 

But, that is not the way things work in the world of the

conservative nanny state. The people who set economic policy in this

country donít want to pay nurses higher wages. They have a different

solution - bring more nurses from developing countries into the United

States. These nurses will be very happy to work for the current wages

received by nurses in the United States, which are far higher than

what nurses in places like the Philippines or India earn. (Never mind

the impact that this drain of nurses has on developing countries.)

 

Before anyone claims that free immigration is part of a free

market, it is important to remember that the United States does not

have free immigration in general, it only allows free immigration in

occupations where it is trying to depress wages. While it is far

cheaper to educate nurses in developing countries than in the United

States, it is also far cheaper to educate doctors, lawyers,

accountants and economists. The gains from having free immigration for

people working in these professions would be enormous. We could even

share these gains by reimbursing the countries of origin.

 

This would be an enormous win-win scenario. By making our

education and licensing requirements fully transparent and opening the

door to foreigners in the most highly paid professions, we would be

able to drastically reduce the cost of health care, college education

and many other goods and services. This would mean higher living

standards and more jobs for people in the United States. This is the

gains-from-trade story that economists like to tell in other contexts.

We could share these gains with developing countries, paying them 3 or

4 times the costs of educating these professionals, so that they can

educate more professionals for their own countries, and also

redistribute some of this income.

 

Incidentally, this form of free trade would also lead to a more

equal distribution of income, improving the situation of those at the

middle and the bottom and the expense of those at the top. Of course

this is the reason why Congress is not about to remove the barriers

that protect our highly paid professionals from foreign competition.

 

The key to the story is that our political leaders think that free

trade and competition are good only for manufacturing workers, nurses,

and other workers lower down the social ladder. They want the nanny

state to protect the highest-paid workers from international

competition. The huge gap in wages between those at the top and those

at the bottom is not because of the market, itís because those at the

top got Congress to rig the game.

 

Dean Baker is the co-director of the Center for Economic and

Policy Research (CEPR). He is the author The Conservative Nanny State:

How the Wealthy Use the Government to Stay Rich and Get Richer

(www.conservativenannystate.org). He also has a blog, " Beat the

Press, " where he discusses the media's coverage of economic issues. It

can be found at the CEPR website, www.cepr.net.

 

-------