COMPENSATING DIFFERENTIALS AND UNMEASURED ABILITY IN THE LABOR-MARKETFOR NURSES - WHY DO HOSPITALS PAY MORE

Registered nurses (RNs) employed in hospitals realize a large wage adv antage relative to RNs employed elsewhere. Cross-sectional estimates i ndicate a hospital RN wage advantage of roughly 20%. This paper examin es possible sources of the hospital premium, a topic of some interest given the current shifting of medical care out of hospitals. Longitudi nal analysis of Current Population Survey data for 1979-94 suggests th at a third to a half of the advantage is due to unmeasured worker abil ity, and the authors conclude that the remainder of the advantage prob ably reflects compensating differentials for hospital disamenities. Su pporting these conclusions is evidence chat hospital RNs have higher c ognitive ability and higher-quality job experience than non-hospital R Ns, and indications that shift work accounts for roughly 10% of the ho spital premium.