Monopsony in Professional Labor Markets: Hospital System Concentration and Nurse Wage Growth



PDF of working paper:


Rolling waves of consolidation have significantly decreased the number of hospital systems in the U.S., leading to dominant regional systems. Increased concentration potentially affects industry quality, prices, efficiency, wages, and more. Much of the consolidation research is focused on merger events and estimating effects on the merged entities. In contrast, our new working paper is not based simply on merger data but takes account of the overall increase in consolidation across the country without respect to cause.

Specifically, we use the intensity of changes in hospital system consolidation in metropolitan statistical areas (MSAs) over two periods to estimate its effect on the wage growth of higher-earning professional workers—in this case registered nurses. We focus on registered nurses as a homogeneous group of workers with some degree of industry-specific education and skills. Registered nurses represent the largest single occupational classification in hospitals and urgent care centers, representing one in four workers.

Understanding the dynamics of local healthcare labor markets is critical given the importance of the sector for the U.S. economy; even more so in the wake of the pandemic amid continued uncertainty around long-term effects (e.g., early retirements, career shifts, education delays). Moreover, labor shortages among hospital-based nurses, which may be a symptom of monopsony, have been endemic in the industry for many years. The wages of nurses were stagnant between 1995 and 2015 despite increasing demand for healthcare over the same timeframe even as it was the only sector that added employment during the Great Recession. Explanations for the stagnation of nurse wages—in one of the more highly unionized professional occupations in the country—are not readily apparent.

Author(s): Sylvia Allegretto and Dave Graham-Squire

Publication Date: 19 Jan 2023

Publication Site: Institute for New Economic Thinking

Meet the Grinch Stealing the Future of Gen Y And Z



There’s one threat that gets far less attention, which has been impacting American workers since the 1970s: wages that just don’t keep up, despite increased productivity. Social Security was designed for wages that rise with inflation – but that’s not happening. In an interview with the Institute for New Economic Thinking, Eric Laursen, author of The People’s Pension: The Struggle to Defend Social Security Since Reagan, breaks down how the program works, why wage stagnation represents a mounting threat, and what can be done to strengthen and update the program for the 21stcentury.

Lynn Parramore: Social Security has been America’s most successful retirement program for the last 87 years. Yet the public is constantly hearing that the program is going to “run out of money.” Is that actually true? Can Social Security actually go bankrupt?

Eric Laursen: No, and the word bankrupt is just about a complete misnomer when it comes to Social Security. The program is funded by contributions that participants and their employers make through their paychecks. It’s also backed by a Trust Fund which is accumulated over time.

That Trust Fund is dwindling now, and it’s expected to run out of money in the early 2030s. But Social Security can’t actually go bankrupt. If the situation arises where there is not enough money either in the Trust Fund or coming through from contributions to fund current benefits, then those benefits can’t be paid, perhaps as much as 25%. In that case, Congress would be faced with a choice to either cut benefits or increase contributions.

There’s a lot of pressure from people who want to cut Social Security to do it now rather than waiting for that point in the future, because at that point, Congress would be under a lot of pressure to make good on what people have been promised.


LP: What would you do to make sure that Social Security is protected and remains strong? Does it need to be modernized in some ways to keep it effective?

EL: There are a number of things that can be done. One is to raise the cap. More of income beyond the $147,000 threshold needs to be taxed for payroll tax purposes. Another thing that can be done is passing the Social Security Expansion Act that Sanders, Elizabeth Warren, and others have backed. There is a special minimum benefit for Social Security recipients that’s aimed at keeping people who have really low incomes during their lifetimes above the poverty level, and that needs to be improved. That’s not asking a lot. It should be done.

You can also change the rules for wealthy people. One of the differences between now and 40 years ago is that people in the really high income brackets get much more of their income from investments, stock options, and other business holdings than they do from salaries and wages. We need to figure out a formula for applying the payroll tax to at least some of that investment income – like capital gains and so forth. Definitely, the CPI-E needs to be instituted. There should be an expansion of benefits across the board for Social Security benefits. We need the CPI-E at a base level that’s more reasonable. Another thing I think is important: one of the changes that happened in ’83 that was really bad was that Social Security survivor benefits were ended for children of deceased or disabled workers above the age of 18. It used to be that you could get those until 22 and they would help you to go to college. That was abolished. It would be a very good thing if that could be reinstated so that more people have some level of security to pursue higher education.

Author(s): Lynn Parramore

Publication Date: 20 Dec 2022

Publication Site: Institute for New Economic Thinking

A Nobel Award for the Wrong Model




A more realistic assumption would be that by investing the good at T=0, it cannot be paid out and consumed at T=1. This is only possible at T=2. With this assumption, the model has two different assets:

– a liquid asset, i.e. the all-purpose asset has not been invested in T=0 and it can be consumed at T=1,

– an illiquid asset, i.e. the all-purpose asset been invested in T=0 and can only be consumed at T=2.

Without banks, risk-averse agents would not be able to participate in the returns of the investment good. As they all are confronted with the risk of being type 1, it would be very risky to invest the commodity. In T=1, Type 1 agents would then not be able to consume.

In such a model, banks can provide an obvious improvement if one assumes again that they know the share of type 1 and type 2 agents. In T=0, all agents deposit their endowment of the commodity with the bank. Assuming that the share of type 1 agents is 25 %, the bank keeps 25 % of the all-purpose asset unchanged and invests 75 % as illiquid long-term investment. It thus performs maturity transformation by transforming liquid assets into illiquid assets (Figure 2).

Author(s): Peter Bofinger and Thomas Haas

Publication Date: 18 Oct 2022

Publication Site: Institute for New Economic Thinking

It’s Worse than “Reverse” – The Full Case Against Ultra Low and Negative Interest Rates




It is becoming increasingly accepted that lowering interest rates might at some point prove contractionary (the “reversal interest rate”) if lower lending margins cut the supply of bank loans. This paper argues that there are many other reasons to question reliance on monetary policy to provide economic stimulus, particularly over successive financial cycles. By encouraging the issue of debt, often for unproductive purposes, monetary stimulus becomes increasingly ineffective over time. Moreover, it threatens financial stability in a variety of ways, it leads to real resource misallocations that lower potential growth, and it finally produces a policy “debt trap” that cannot be escaped without significant economic costs. Debt-deflation and high inflation are both plausible outcomes.

Author(s): William White

Publication Date: 5 March 2021

Publication Site: Institute for New Economic Thinking

Covid Is Hitting Workers Differently Than the 2008 Financial Crisis



In a new INET working paper, we examine inequality in employment outcomes across social groups during recessions. We take a comparative perspective, studying results from two recent and severe US recessions: the “Great Recession” linked with the global financial crisis beginning in late 2007 and the “lockdown” recession caused by the COVID-19 pandemic. Comparing these two events presents an interesting case study to explore inequality in recessions.

The severity of a recession depends both on how much employment declines and the persistence of those declines. The primary job-months lost statistic in our analysis is designed to capture both of these dimensionsThis measure simply adds up the difference between actual employment and pre-recession employment over the recession months. For example, if the pre-recession employment trend for a demographic group was flat and a person in that group lost a job in April but went back to work in July, that person’s experience would add three job-months lost to the total in their demographic group.

Author(s): Steven Fazzari, Ella Needler

Publication Date: 19 April 2021

Publication Site: Institute for New Economic Thinking