Can National Pay Bargaining in the NHS Kill?

Pay for NHS clinical staff (nurses and physicians) is set nationally, with very little variation to take into account local labour market conditions. This is a problem because in the UK regional pay differences are high, even when you control for things like education and skills. As a result, there are large differences in the UK between wages inside and outside sectors where pay is strictly regulated like the NHS. In some regions NHS clinical staff are overpaid relative to local labour market conditions, while in others (London and the South East) clinical staff are underpaid and would get higher pay if they left the NHS for the private sector.

This leads to worse outcomes for patients according to a 2010 paper from Propper and Van Reenen. Looking at the hospital death rate for heart attacks alone, they find that national pay setting for NHS clinical staff (nurses in particular) leads to 366 extra deaths every year.

In effect, national pay setting in the NHS for nurses acts as a price ceiling in high wage regions, which in the absence of other countervailing factors should generally lead to an undersupply.

There are two major predictable effects of this defacto price ceiling.  First, we should expect nurses to move from areas where their wages are relatively low (London and the South-East) to areas where their wages are relatively high (South-West and the North-East). Second, we should expect nurses in London and the South East to leave the regulated sector (NHS) for the unregulated sector (private nursing homes) where they can expect higher pay. Put simply, we should expect the NHS to get better in low wage regions, and get worse in high wage regions. 

Now this alone doesn’t really tell us much about the overall effect of setting pay nationally in the NHS. Perhaps the benefits of better service in the North-East outweigh the harm of worse service in London.

However, the data implies that regulating pay leads to worse outcome across the NHS on balance. Part of the problem is that people have strong area-based preferences: they aren’t willing to just up sticks and move across the country unless they’re getting a serious jump in wages. So instead they’ll be more likely to stay in the high wage region and just leave the NHS altogether to move into the nursing home sector where pay isn’t set nationally. 

On balance, this leads to 366 extra heart attack deaths each year across the NHS. But the authors suggest this figure might, if anything, be understating the harms of national pay setting:

If we were able to calculate the fall in quality across a much wider range of illnesses (deaths and more minor loss of quality of life), we would scale up the social loss by a very large amount.

If we devolved pay negotiation and hiring powers to trusts, we could raise standards across the NHS and most importantly, save lives!

This is not the right time for another pay claim by NHS unions

On Monday, NHS unions plan stoppages 'short of strike action'. It may not feel like it if your hospital treatment has been cancelled or you are lying in a ward with fewer nurses to look after you. The stoppages come after strikes back in October failed to move the government to raise its pay offer for NHS staff. A pay review body recommended a 1% increase for all NHS staff, but the government argues that this is unaffordable and unfair. After all, the 3% 'increment' rise puts more money into the hands of higher-paid NHS workers than lower-paid ones.And some 55% of NHS staff already get an annual 3% rise: so the government is saying that any extra cash for wages should go to the workers who do not get this. So it is proposing a 1% rise for the others, but not an extra 1% on top of the existing 3% increments.

Extending the 1% rise to all NHS workers, says the government, will cost around £300 million. Some 75% of hospitals' budgets is staff costs, so the extra cost that the union proposals would impose on them would mean cutbacks in staff – some 4,000 nurses lost this year, and another 10,000 next year. That could leave hospitals unsafe, risking another Mid-Staffordshire disaster.

Many members of the public would say that NHS staff should count themselves lucky. Average pay in the UK grew just 0.1% last year, and many businesses are hanging on by the skin of their teeth. But NHS pay has been rising since 2012. More than 5,000 nurses were recruited last year, and more midwives too. Public sector pay is generally higher than private sector pay for the same job, even before you count the more secure and higher public sector pensions. Lower paid workers, including those in the NHS, have been helped by the rise in the tax threshold to £10,000. Moreover, the £133 billion NHS budget – some 18% of public spending or over £2,000 per man, woman and child – is ring-fenced, so there is no chance of it falling – unlike the fortunes of most high-street businesses.

And if you want to know how bad things can really get, look at Portugal, which slashed its health budget 17%. Our public finances are not quite in that much of a mess, but things are still tight. The UK has economic growth of 3% but it is still fragile, and there are lots of things that could still spell disaster – a potential crisis in the eurozone, ebola, tension with Russia, you name it. The British government is 1.45trillion in debt, and adding to that debt by another £100 billion a year, despite creaming off 40% of the national income in taxes.

This just is not the right time for another pay claim. And certainly not for another Winter of Discontent (with images of ambulance crews dropping 'non-emergency' cases off in the snow to find their way home). The mind shivers. It is clear the government cannot budge, so why don't we all go back to work and try to get Britain out of this mess?

Can we stop talking about the alleged 'gender wage gap' now?

Many are boasting good news on the ‘gender wage gap’—I agree, it’s great news: the Office for National Statistics’ findings offer more proof that wage gaps have very little to do with gender, and much more to do with choices each gender is prone to make. From the BBC:

The average full-time pay gap between men and women is at its narrowest since comparative records began in 1997, official figures show.

The difference stood at 9.4% in April compared with 10% a year earlier, the Office for National Statistics (ONS) said, a gap of about £100 a week.

This as well:

Hourly earnings figures reveal that, in April 2014, women working for more than 30 hours a week were actually paid 1.1% more than men in the 22 to 29 age bracket and, for the first time were also paid more in the 30 to 39 age bracket…

…The government said that, from next year, it was extending the rights for shared parental leave. It had also invested in training and mentoring for women to move into higher skilled, higher paid jobs, and guidance to women looking to compare their salaries with male counterparts.

Women, from the start of their careers, are now earning a higher salary than men; and, if they choose to make the decision to stay in the work force, they are more likely to be promoted than their male counterparts as well.The real gap, it seems, is not between women and men, but between mothers and child-less women. Leaving a job early on in one's career or for an extended period of time to have children will impact a women’s salary when she returns to the work force.

As this is the case, I think the government is probably right to extend rights for shared parental leave (though the money put into training will surely be a waste; women who are ambitious and attracted to careers in science, business, and formerly male-dominated sectors aren’t having much trouble pursuing them). But anything legislated from the top-down can only go so far to change cultural opinions that have been in place for centuries about the role of women and the household.

In reality, women’s choice in their private and home lives will be the greatest determinate as to what further changes we see in wage gaps. It seems there's evidence that good economic climates actually lead more women to stay at home with their kids rather to go out and get jobs - at the same time, we are witnessing an increase in stay-at-home-dads, which, most likely, has multiple reasoning to it: more women are demanding to work, and more men feel comfortable making the choice to stay home.

Either way, it seems there is no obvious discrimination between men and women when they enter the work place; as far the element of motherhood is concerned, we should be less focused on the numbers and far more focused on ensuring that women are not being socially pressured, either way, to make any decision that is not completely their own.