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Nurses' Pay Structure Affects Health Outcomes

23 January 2008

CMPO research finds that the central regulation of nurses’ pay in the UK can have harmful unintended consequences.

Joint research by the Centre for Market and Public Organisation and the London School of Economics Centre for Economic Performance has reported that labour market regulation of nurses’ pay can have harmful unintended consequences. Because nurses’ pay rates are centrally negotiated, hospitals in prosperous areas (like inner London) encounter recruitment difficulties not found in less prosperous areas (like the North East). As a result hospitals in prosperous areas treat fewer patients and have worse results than those in poorer areas. The research found that a 10% increase in the ‘outside wage’ is associated with a 4% to 8% increase in deaths following emergency heart attack (Acute Myocardial Infarction or AMI) admissions. The report concludes: “Rather than focusing on across-the-board increases in national pay … relaxing the regulatory system to allow local wages to reflect local market realities would improve productivity and save lives.”

The research, using data from 1995 to 2002, is published in the CMPO working paper, written jointly by Emma Hall, Carol Propper  and John Van Reenen (LSE), Can pay regulation kill? Panel data evidence on the effect of labour markets on hospital performance (PDF 795KB)  The findings have naturally attracted media interest. The Times on Line covered the research under the headline “Nurses’ low pay ‘fatal in rich areas’”; and the Financial Times reported the research under the headline ”NHS pay system puts lives at risk in the south.” Professor Propper discusses the effects of centralized pay setting in this CMPO podcast interview.

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