Growing Wage Disparity Within Oregon’s Hospitals

While digging into employment trends within Oregon’s hospitals, I noticed an odd discrepancy between the median wage and the average wage for hospital workers. As a reminder, the median is the middle figure; if there were 101 workers, the median would be the wages for the 51st highest paid employee. In contrast, the average takes all wages earned and divides it by the number of employees. In labor economics, we typically see the average wage being higher than the median. There is a floor to wages, the minimum wage, but no artificial ceiling. As a result, you can have outliers that pull up the average, but these outliers would have little effect on the median.

Although we would expect to see the average higher than the median, we typically expect to see these two figures rise or fall at a similar pace. However, we have seen a notable discrepancy between the median and average wage in Oregon’s hospitals. The average hourly wage for Oregon hospital workers rose by $3.59 between 2011 and 2016, a growth of 12.7 percent. The median hourly wage rose by $1.97, a growth of 11 percent. When controlling for inflation we see the average hospital worker saw real wage gains of around 1.5 percent, but the median hospital worker saw no change over the same period. Why this discrepancy? What is making the average wage grow at a faster rate than the median wage for hospital workers?

When breaking out hospital jobs in Oregon by various wage categories, over half of Oregon hospital jobs (55.6%) made less than $20 an hour in 2016, which is a slightly higher proportion than we saw in 2011 (54.2%). If we look at the other end of the spectrum, those making $50 an hour or greater, we see no change in the proportion of hospital workers in these high wage categories (~13%). A greater proportion of hospital workers were in the low-wage category, while the proportion of workers in the high-wage categories was unchanged. What this means is that the faster growth in the average wage compared with the median cannot be due to a greater share of high wage workers. Instead, it is likely due to wage gains amongst those higher paid workers.

It is notoriously difficult to track occupational wages over time. However, using previous responses to the Occupational Employment Statistics survey we were able to estimate wages for select occupational groups within Oregon’s general medical and surgical hospitals in 2013 and 2016. Three occupational groups were isolated to see if we are seeing greater wage inequality within the state’s hospitals: management occupations; healthcare practitioners and technical occupations; and healthcare support occupations. The management occupations include both frontline managers, as well as executives. Health practitioners include occupations such as physicians, surgeons, registered nurses, and technicians. Health support occupations include medical assistants, Certified Nursing Assistants, and pharmacy aides. In general, these three occupational groups provide a good stratification of the occupations in the hospital setting.

Of these three occupational groups, the largest wage gains were seen in the management occupations where the median wage rose by 9.8 percent between 2013 and 2016. Wage gains amongst healthcare practitioners were slightly lower than their manager peers with the median wage rising 8.9 percent, still healthy gains. The healthcare support occupations saw their wages grow at the slowest pace, rising around 7.4 percent.

Hospital settings in Oregon are seeing a greater wage disparity between high-wage and lower-wage occupations, with the lower wage occupations experiencing slower growth over the past three years. These higher wage occupations, such as managers, executives, and doctors include outliers who are pulling up the industry average wage faster than the median wage. This doesn’t seem to be a trend exclusive to general surgical and medical hospitals. A number of private-sector industries saw their average wage rise faster than the median over the past five years implying either faster employment growth or faster wage gains from high-wage occupations. These industries included construction; manufacturing; retail trade; transportation, warehousing, and utilities; professional and business services; and leisure and hospitality.

None of this analysis points to why these high-paying occupations are seeing faster wage gains than the lower wage occupations in the state’s hospitals. The answer is likely tightness in the labor market, particularly for high-skilled occupations.

The most recent annual vacancy survey for Oregon found that there were over 10,000 health care job vacancies at any given time in 2016. Of those, 72 percent were identified as difficult-to-fill, a notably higher share than all statewide vacancies (64%). Many of these vacancies were identified as difficult-to-fill due to lack of applicants or lack of qualified applicants. Our rapid economic expansion coupled with lower unemployment is making it difficult for businesses to find workers; hospitals are not exempt from these labor constraints. The easiest way to boost an applicant pool if you are having a difficult time filling a vacancy is to increase the wages. Doctors, surgeons, hospital administrators, and other high-paying occupations in the hospital are highly skilled and educated. It is likely more difficult to hire these positions, leading to faster wage gains.

Hospitals are facing tough times across the state with high anxiety over potential changes to federal health policy and the ramifications for reimbursements. Several hospitals across the state have already announced pay freezes, hiring freezes and layoffs as they experience significant budget shortfalls. It will be interesting to check back in several years to see if these large pay increases for high-wage occupations will slow as hospitals look for ways to manage rising costs.

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