14 - Collusion in the Nurse Labor Market

Summary

The United States has faced a significant and persistent nurse shortage. Usually, a shortage is remedied with increased prices (or wages), which would increase the number of nurses. But hospital administrators appear to be unwilling to raise salaries for nurses. Unfortunately, this means that patients may not receive the quality of care that a fully staffed hospital could provide. The exercise of monopsony power may be one explanation for the persistent shortage. Employers of nurses often have substantial monopsony power, which allows them to increase their profits by reducing the quantity of nurses they hire. Having and exercising monopsony power, however, is not per se illegal. In this chapter, we focus on a possible alternative explanation for the nursing shortage: collusive monopsony in the nurse labor market, behavior that is per se illegal. It occurs when firms conspire with one another to depress wages. Recent antitrust litigation in several states has indicated that there may be pervasive collusion and information sharing among hospitals aimed at depressing the salaries of nurses.