Question

Nursing "Shortages": Market failure with Monopsony Power in the Market for Registered Nurses?

Answer 1

Anss...
A shortage of nurses has been acute for several years. The buyer's side of the labor market for hospital behaves like a monopsony or classical oligopsony. Nurses are frequently secondary wage earners, thus declines the elasticity of supply in specific area. Moreover as job requires special skills in the profession and as there are not high number of occupation which are close substitutes. Due to low mobility of the nurses across jobs and high concentration of the hospitals give rise to monopsony or classical oligopsony in the local areas. Exploitation, if occurs, can aggravate the concern of shortage because a high turnover rate is also observed in such labor market
To summarize, in most of the areas the number of hospitals (employers) are very limited, and such concentrated and localized nature of the industry usually gives the employers certain market power and allows them to impose lower than the competitive wages and higher workloads on the workers (nurses), resulting to the alleged monopsonistic/oligopsonistic exploitation. The problem is also aggravated due to the lack of mobility.