Monday’s walkout of tens of thousands of nurses and ambulance staff was the largest in the NHS’s 75-year history.
Labor demonstrations have been ongoing across the past few months, as workers demand higher pay and better working conditions amid rampant national inflation and increased workloads.
Specific demands vary by union and nation within the United Kingdom. Welsh nurses called off their strike this week to review a proposal from Wales’ Labour Party-run government, while the Royal College of Nurses, the UK’s largest nursing union, has countered a nominal 5 percent pay increase proposal with demands for a five percent pay raise on top of inflation, which topped 10 percent in Britain in December.
The Gist: A glance at our neighbors across the pond shows that the US healthcare system is not the only one currently experiencing a labor crisis.
The UK’s nationalized system has also failed to shield its workers from the combined impact of COVID burnout and inflation. But the NHS, as the UK’s largest employer and perennial object of political maneuvering, is more susceptible to organized labor actions.
In contrast, American healthcare unions, which only covered 17 percent of the country’s nurses in 2021, must negotiate with local employers, whose responses to their demands vary.
While this may enhance the bargaining power of US health system leaders, it also heightensthe risk that we will fail to adequately secure our nursing workforce, a key national resource already in short supply, for the longer term.
The healthcare sector has been navigating an intransigent staffing crisis since the widespread layoffs during the first few months of COVID. The graphic above uses Bureau of Labor Statistics data to illustrate the impact of this labor shock on both total employment and employee compensation.
Across key healthcare settings, workplaces with the slowest recovery of total workers have seen the largest increases in employee earnings.Hospital employment largely tracked with the rest of the private sector; however, hospitals raised employee compensation by two percent more than the private sector, while recovering two percent fewer jobs.
It is important to note that the relationship between employment levels and employee compensation is not causal, as evidenced by the ongoing labor shortages in nursing facilities, despite boosting average pay over 20 percent. Rather, the data suggest that, for as long as the tight labor market persists,pay raises alone are not sufficient to recruit and retain talent. Plus, while inflation may be abating, it has still outpaced earnings growth since December 2021.
Given that many healthcare workers saw pay bumps early in the pandemic, some are left still feeling underpaid, even if their compensation over the past three years has more than kept pace with inflation.
CFOs are planning to increase their compensation spend in 2023, with 86% of finance chiefs noting they plan to raise it by at least 3% year-over-year, according to a recent survey by Gartner.
CFOs are still facing a tight labor market in 2023. As CFOs weigh increased turnover and a more remote workforce, “they’re thinking through, how do they use compensation as a lever to engage and retain talent across their workforce,” said Alexander Bant, chief of research in the Gartner finance practice.
Only 5% of the 279 CFOs surveyed stated they planned to reduce their compensation spend in 2023, according to Gartner.
While CFOs typically budget more for compensation every year, ongoing inflationary pressures and a still-tight labor market puts compensation plans “front and center” in CFOs’ “ability to engage and retain top talent,” Bant said in an interview.
However, this does not mean finance chiefs will be budgeting for sweeping pay raises across their entire workforce — CFOs are “not trying to keep up with inflation across the board,” Bant said.
Rather, they are working with other members of the C-Suite such as the chief human resource officer and using tools like advanced analytics to single out and reward top performers which might be at more risk of departing for other opportunities, he said.
“CFOs are being more deliberate about how they allocate that money,” Bant said.
While the pace of wage growth slowed in the fourth quarter of 2022, according to recent data from the Labor Department, tamping down fears of a wage-price spiral, the war on talent remains a top worry for finance chiefs. Raising compensation can allow companies to be more competitive in the face of ongoing talent shortages, especially as workforce needs change.
For those companies which are moving employees back into the office, for example, raising compensation can help them to better compete against the remote or hybrid work opportunities which are becoming increasingly common, for example, Bant said.
Upping compensation can also help firms to find or hold onto employees with the key skills they need in areas such as digital transformation. Despite cost pressures, 43% of finance chiefs said they plan to increase their companies’ technology spend by 10%or more, according to the Gartner survey.
“What we’re hearing is, ’Yes, we are right-sizing parts of our organization and reducing head count in certain areas, but at the same time, we still have open roles and we’re still searching for talent in those areas that align to our digital transformation priorities,” Bant said of the search for technology talent.
Such skills still come at a premium, for that matter, despite the recent spat of layoffs across high-profile tech companies such as Google parent Alphabet, IBM and Microsoft. While these companies have reduced staff, they may not be letting go of employees with critical hardcore coding, data analytics or artificial intelligence related skills, Bant said.
“There is more talent available from technology companies, but that doesn’t mean that talent necessarily has the technical skills to drive the digital transformations that many CFOs and their leadership teams need,” he said.
The percentage of healthcare organizations with an internal minimum wage of $15 or higher increased significantly over the last year, according to the “2022 Health Care Staff Compensation Survey” from SullivanCotter.
In 2021, less than 30 percent of healthcare organizations had an internal minimum wage of $15 per hour or more; this year, nearly 70 percent do. Some health systems are increasing the internal minimum wage to stay competitive amid staffing shortages and rising inflation. Others are increasing hourly rates as a result of union negotiations.
Health systems reported large increases in overall staff salaries, wages and benefits this year, and many expect to see increases in 2023 as well.
Here is how the internal minimum wage rates changed over the last year:
1. Less than $10 per hour 2021: 2.9 percent 2022: 2.2 percent
2. $10 per hour 2021: 14.7 percent 2022: 5 percent
3. $11 per hour 2021: 13.7 percent 2022: 3.9 percent
4. $12 per hour 2021: 12.7 percent 2022: 7.8 percent
5. $13 per hour 2021: 12.7 percent 2022: 6.1 percent
6. $14 per hour 2021: 14.7 percent 2022: 5.6 percent
7. $15 per hour 2021: 26.5 percent 2022: 53.9 percent
8. More than $15 per hour 2021: 2 percent 2022: 15.6 percent
The Goldilocks nature of these jobs numbers is particularly apparent in the wage data.
By the numbers: Average hourly earnings rose by 0.3% in December, and are up 4.6% over the last year. Over the last three months, worker pay rose at a 4.1% annual rate.
Wages are rising, but unlike a year ago, the pace is consistent with the economy settling into the 2% inflation that the Fed seeks.
For example, there were stretches in 2018 and 2019 that featured wage growth similar to that in Q4 paired with low inflation levels — which meant rising real wages for workers.
In other words, current pay growth, if sustained, would help diminish the Fed’s fears of an upward spiral of wages and prices. Also, it sets workers up to see gains in their real compensation, if and when inflation comes down.
The intrigue: It appears that a surge in earnings initially reported in November was a head fake. The Labor Department revised those numbers to show a 0.4% rise in hourly earnings, not the 0.6% first reported.
The original figures had been a source of alarm among Fed watchers, suggesting the central bank might need to step up its monetary tightening campaign.
It is a good reminder — for both policymakers and those of us in the media — to not overreact to single-month shifts in any volatile data series.
It’s been a difficult year for the hospital workforce, both here and around the world, as the effects of the pandemic, the economy, and the legacy of lean staffing models have combined to drive up vacancy rates and threaten the sustainability of hospital operations.
Everywhere we’ve gone in the past six months, workforce issues have overshadowed every other topic: how can hospitals attract and retain staff given the environment, how can they stabilize finances in the face of 15-20 percent increases in labor costs, how can they safeguard patient care with intense turbulence in the clinical workforce?
This week we heard yet another wrinkle to this problem, one that had not occurred to us but in retrospect is obvious. A system CFO was lamenting the fact that even with big salary increases, the hospital workforce remains unstable. “It’s like we’re not even getting credit for raising base salary 15 percent across the board and giving big retention bonuses.”
As to why—it’s a timing issue. Her system, like many, delivered pay raises back in the late winter and early spring, when staff were still recovering from the Omicron surge and the urgency of reducing reliance on expensive agency labor became clear. But economy-wide inflation had only then begun to spike, and has since continued to be stuck at high levels.
Staff don’t view the earlier salary increases as a response to inflation, but as predating it—and they’re asking for still more, to offset rising prices for food, transportation and housing. “I wish we’d waited to give the pay bump,” the CFO told us. “Even though our wage increases have outpaced inflation this year, the timing of events didn’t help us at all.”
With the hospitals operating near capacity, and a severe flu season impacting both patient volumes and staff availability, her sense is that the system is back to square one on staffing—and more difficult financial decisions lie ahead.