Nurses' retention and hospital characteristics in New South Wales, CHERE Discussion Paper No 52

NURSES’ RETENTION AND HOSPITAL CHARACTERISTICS IN NEW SOUTH WALES

1. INTRODUCTION

Nursing shortages are commonly observed features of hospital systems in Australia, Europe and the
United States. For example US labour force planning models suggest a shortfall of 7% to 14%
between the number of nurses available and the number of nurses required. In Australia, a DEST
report commissioned for the National Review of Nursing Education estimates an excess demand of
40,000 registered nurses (RNs) by 2010 (see Karmel and Li, 2002). Shortages of nursing staff are
attributed in part to a low intake but very high turnover rates have also been identified as a major
contributory factor. Many RNs treat nursing employment as a marginal or fall-back activity that can
be resorted to in the absence of preferred alternatives. US figures suggest annual quit rates of 12%
to 15% and the estimates in this paper suggest that for NSW the percentage of nurses not returning
to work in a given year is about 20%.¹

A significant number of studies on nursing labour supply emerged in the early 1970s, paralleling the
general interest in labour supply at that time. However, to date there has been no study of the
nursing labour supply in Australia. This paper along with the companion paper Doiron and Jones
(2003b) present the first set of results in this area for Australia. This literature suggests that a
number of factors are responsible for the relative decline in the nursing workforce. These include,
low relative wages, increased skill requirements, poor promotion possibilities, more direct
competition with other occupations, ageing and retirement of the nursing workforce, low job
satisfaction, long hours, shift work and work stress.

A summary of the nursing labour supply literature is found in Shields (2003) and Altonazzo et al
(2003). Particular emphasis has been placed on the wage elasticity of labour supply. This is not
surprising as wages constitute a possible policy instrument for the predominantly public employers
of nurses. Results on the wage elasticity have been varied but most of the evidence especially the
more recent findings support very low values of the order of 0.1 to 0.3.² This implies that using wages
to increase the nursing labour force will be both ineffective and very costly to the health budget.

In common with the general labour supply literature, other factors addressed in the literature on the
nursing labour force have been the estimation of the elasticity of the participation decision with
respect to the wage rate, the impact of demographic effects such age and number of children,
spouse income and childcare availability. Generally, results suggest a negative income elasticity of
spouse income and a substantial negative effect on participation of the presence of young children.³
Based on data for the UK, Shields and Ward (2001) also report that job satisfaction, inadequate
promotion possibilities, poor training and high workloads are important factors in expressed
quitting intentions.

Clearly the evidence to date points to non wage factors in explaining nurses’ dissatisfaction with their
jobs and their decisions to quit the nursing profession. In this paper we look at detailed job
characteristics in explaining the retention probability of nurses in NSW. Specifically, we match RNs
working in the public sector in NSW to their place of employment and use the characteristics of the
place of employment together with the nurses’ personal characteristics to explain the retention
probabilities of the sample of nurses. To the best of our knowledge this is the first instance where
hospital characteristics have been used to explain nurses’ retention.

Our main data source consists of the labour force questionnaire which is given to nurses at the time
of registration with the NSW Nursing Registration Board (NRB). All nurses working in NSW must be
registered with the NRB and registration must be renewed every year. It is estimated that over 90% of
registrants fill in the questionnaire. Information is included on personal and job characteristics, and
location of the job. From this sample we extract RNs working in the public sector in NSW who have
provided a postcode for their workplace which allows the nurse to be matched to a hospital. Our
analysis sample includes 16,393 RNs working in 1996. Of these, 13,197 (80.5%) were still working as
nurses in NSW in 1997 (although not necessarily in the public sector).

1 This is not strictly a quit rate, in the sense of irrevocable return, as there appears to be a significant amount
of churning.

2 For example see Benham (1971), Solan and Richupan (1975), Link and Settle (1979) and (1981), Ault and Rutman
(1994), and Askilden et al (2003).

3 See the references listed in footnote 2.

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