shortage

pnrj core principles, market failure, public policy , , , , , , , , , , , , , , , , ,

There should be a glut of nurses.

Jan 15 JDN 2459960

It will not be news to most of you that there is a worldwide shortage of healthcare staff, especially nurses and emergency medical technicians (EMTs). I would like you to stop and think about the utterly terrible policy failure this represents. Maybe if enough people do, we can figure out a way to fix it.

It goes without saying—yet bears repeating—that people die when you don’t have enough nurses and EMTs. Indeed, surely a large proportion of the 2.6 million (!) deaths each year from medical errors are attributable to this. It is likely that at least one million lives per year could be saved by fixing this problem worldwide. In the US alone, over 250,000 deaths per year are caused by medical errors; so we’re looking at something like 100,000 lives we could safe each year by removing staffing shortages.

Precisely because these jobs have such high stakes, the mere fact that we would ever see the word “shortage” beside “nurse” or “EMT” was already clear evidence of dramatic policy failure.

This is not like other jobs. A shortage of accountants or baristas or even teachers, while a bad thing, is something that market forces can be expected to correct in time, and it wouldn’t be unreasonable to simply let them do so—meaning, let wages rise on their own until the market is restored to equilibrium. A “shortage” of stockbrokers or corporate lawyers would in fact be a boon to our civilization. But a shortage of nurses or EMTs or firefighters (yes, there are those too!) is a disaster.

Partly this is due to the COVID pandemic, which has been longer and more severe than any but the most pessimistic analysts predicted. But there shortages of nurses before COVID. There should not have been. There should have been a massive glut.

Even if there hadn’t been a shortage of healthcare staff before the pandemic, the fact that there wasn’t a glut was already a problem.

This is what a properly-functioning healthcare policy would look like: Most nurses are bored most of the time. They are widely regarded as overpaid. People go into nursing because it’s a comfortable, easy career with very high pay and usually not very much work. Hospitals spend most of their time with half their beds empty and half of their ambulances parked while the drivers and EMTs sit around drinking coffee and watching football games.

Why? Because healthcare, especially emergency care, involves risk, and the stakes couldn’t be higher. If the number of severely sick people doubles—as in, say, a pandemic—a hospital that usually runs at 98% capacity won’t be able to deal with them. But a hospital that usually runs at 50% capacity will.

COVID exposed to the world what a careful analysis would already have shown: There was not nearly enough redundancy in our healthcare system. We had been optimizing for a narrow-minded, short-sighted notion of “efficiency” over what we really needed, which was resiliency and robustness.

I’d like to compare this to two other types of jobs.

The first is stockbrokers.Set aside for a moment the fact that most of what they do is worthless is not actively detrimental to human society. Suppose that their most adamant boosters are correct and what they do is actually really important and beneficial.

Their experience is almost like what I just said nurses ought to be. They are widely regarded (correctly) as very overpaid. There is never any shortage of them; there are people lining up to be hired. People go into the work not because they care about it or even because they are particularly good at it, but because they know it’s an easy way to make a lot of money.

The one thing that seems to be different from my image may not be as different as it seems. Stockbrokers work long hours, but nobody can really explain why. Frankly most of what they do can be—and has been—successfully automated. Since there simply isn’t that much work for them to do, my guess is that most of the time they spend “working” 60-80 hour weeks is actually not actually working, but sitting around pretending to work. Since most financial forecasters are outperformed by a simple diversified portfolio, the most profitable action for most stock analysts to take most of the time would be nothing.

It may also be that stockbrokers work hard at sales—trying to convince people to buy and sell for bad reasons in order to earn sales commissions. This would at least explain why they work so many hours, though it would make it even harder to believe that what they do benefits society. So if we imagine our “ideal” stockbroker who makes the world a better place, I think they mostly just use a simple algorithm and maybe adjust it every month or two. They make better returns than their peers, but spend 38 hours a week goofing off.

There is a massive glut of stockbrokers. This is what it looks like when a civilization is really optimized to be good at something.

The second is soldiers. Say what you will about them, no one can dispute that their job has stakes of life and death. A lot of people seem to think that the world would be better off without them, but that’s at best only true if everyone got rid of them; if you don’t have soldiers but other countries do, you’re going to be in big trouble. (“We’ll beat our swords into liverwurst / Down by the East Riverside; / But no one wants to be the first!”) So unless and until we can solve that mother of all coordination problems, we need to have soldiers around.

What is life like for a soldier? Well, they don’t seem overpaid; if anything, underpaid. (Maybe some of the officers are overpaid, but clearly not most of the enlisted personnel. Part of the problem there is that “pay grade” is nearly synonymous with “rank”—it’s a primate hierarchy, not a rational wage structure. Then again, so are most industries; the military just makes it more explicit.) But there do seem to be enough of them. Military officials may lament of “shortages” of soldiers, but they never actually seem to want for troops to deploy when they really need them. And if a major war really did start that required all available manpower, the draft could be reinstated and then suddenly they’d have it—the authority to coerce compliance is precisely how you can avoid having a shortage while keeping your workers underpaid. (Russia’s soldier shortage is genuine—something about being utterly outclassed by your enemy’s technological superiority in an obviously pointless imperialistic war seems to hurt your recruiting numbers.)

What is life like for a typical soldier? The answer may surprise you. The overwhelming answer in surveys and interviews (which also fits with the experiences I’ve heard about from friends and family in the military) is that life as a soldier is boring. “All you do is wake up in the morning and push rubbish around camp.” “Bosnia was scary for about 3 months. After that it was boring. That is pretty much day to day life in the military. You are bored.”

This isn’t new, nor even an artifact of not being in any major wars: Union soldiers in the US Civil War had the same complaint. Even in World War I, a typical soldier spent only half the time on the front, and when on the front only saw combat 1/5 of the time. War is boring.

In other words, there is a massive glut of soldiers. Most of them don’t even know what to do with themselves most of the time.

This makes perfect sense. Why? Because an army needs to be resilient. And to be resilient, you must be redundant. If you only had exactly enough soldiers to deploy in a typical engagement, you’d never have enough for a really severe engagement. If on average you had enough, that means you’d spend half the time with too few. And the costs of having too few soldiers are utterly catastrophic.

This is probably an evolutionary outcome, in fact; civilizations may have tried to have “leaner” militaries that didn’t have so much redundancy, and those civilizations were conquered by other civilizations that were more profligate. (This is not to say that we couldn’t afford to cut military spending at all; it’s one thing to have the largest military in the world—I support that, actually—but quite another to have more than the next 10 combined.)

What’s the policy solution here? It’s actually pretty simple.

Pay nurses and EMTs more. A lot more. Whatever it takes to get to the point where we not only have enough, but have so many people lining up to join we don’t even know what to do with them all. If private healthcare firms won’t do it, force them to—or, all the more reason to nationalize healthcare. The stakes are far too high to leave things as they are.

Would this be expensive? Sure.

Removing the shortage of EMTs wouldn’t even be that expensive. There are only about 260,000 EMTs in the US, and they get paid the apallingly low median salary of $36,000. That means we’re currently spending only about $9 billion per year on EMTs. We could double their salaries and double their numbers for only an extra $27 billion—about 0.1% of US GDP.

Nurses would cost more. There are about 5 million nurses in the US, with an average salary of about $78,000, so we’re currently spending about $390 billion a year on nurses. We probably can’t afford to double both salary and staffing. But maybe we could increase both by 20%, costing about an extra $170 billion per year.

Altogether that would cost about $200 billion per year. To save one hundred thousand lives.

That’s $2 million per life saved, or about $40,000 per QALY. The usual estimate for the value of a statistical life is about $10 million, and the usual threshold for a cost-effective medical intervention is $50,000-$100,000 per QALY; so we’re well under both. This isn’t as efficient as buying malaria nets in Africa, but it’s more efficient than plenty of other things we’re spending on. And this isn’t even counting additional benefits of better care that go beyond lives saved.

In fact if we nationalized US healthcare we could get more than these amounts in savings from not wasting our money on profits for insurance and drug companies—simply making the US healthcare system as cost-effective as Canada’s would save $6,000 per American per year, or a whopping $1.9 trillion. At that point we could double the number of nurses and their salaries and still be spending less.

No, it’s not because nurses and doctors are paid much less in Canada than the US. That’s true in some countries, but not Canada. The median salary for nurses in Canada is about $95,500 CAD, which is $71,000 US at current exchange rates. Doctors in Canada can make anywhere from $80,000 to $400,000 CAD, which is $60,000 to $300,000 US. Nor are healthcare outcomes in Canada worse than the US; if anything, they’re better, as Canadians live an average of four years longer than Americans. No, the radical difference in cost—a factor of 2 to 1—between Canada and the US comes from privatization. Privatization is supposed to make things more efficient and lower costs, but it has absolutely not done that in US healthcare.

And if our choice is between spending more money and letting hundreds of thousands or millions of people die every year, that’s no choice at all.

Why does nobody want to become a teacher?

pnrj public policy , , , , , , , , , , , ,

JDN 2457366

The United States is currently suffering a large and growing shortage of qualified teachers, particularly in grades K-12. In some particular areas, this shortage is extremely acute; high schools are not able to teach some courses because there is simply no one qualified to teach them. Science and math teachers are in particularly high demand, because these programs are being expanded even as the people qualified to teach them are shifting over to working at the college level or in the private sector.

Other countries are also suffering severe teacher shortages, including the UK and several other countries in the EU.
The problem is projected to get worse: Enrollments in teacher training are rapidly declining. Meanwhile, because somewhere along the way people got convinced that the problem with education is that our teachers aren’t smart enough (this is completely, totally wrong by the way), standards for becoming a teacher are becoming ever more stringent, narrowing the pool even more.

This is a very serious problem, because education—often called “human capital investment” in economic jargon—is one of the most important investments any society can make. Indeed, it may be the most important, the one factor of production that is absolutely indispensable. If you run out of one raw material, you can make products out of something else. Manual labor can be replaced by machines. If you don’t have enough machines, you can build more. But if you find yourself without anyone who knows how to read and do arithmetic, how are you going to replace that? If we imagine a scenario like being trapped on a desert island or colonizing Mars where we have to start from scratch and we are only allowed to have one factor of production, education is the one we would want to have. (I guess if it’s Mars you do need a certain bare minimum of physical capital, like a spacesuit.)

The teacher shortage is most acute in high-poverty areas, where educational outcomes are terrible. Indeed, the most important cause of the failings of the US education system has always been poverty.

Why are teachers in poor schools so underqualified? Because their working conditions are terrible. Turnover is extremely high because teachers are underpaid, the schools are undersupplied, and their administrators do not support them.

Why are there so many teachers not qualified to teach their subjects? Because people who are qualified can find better jobs in other places. Jobs just as rewarding, that make just as large a contribution to society, which are more pleasant, offer more autonomy, and pay a lot better.

If you are an expert in physics, you could become a physicist and make a median income of $106,000.

If you are an expert in economics, you could become an economist and make a median income of $92,000.

If you are an expert in biology, you could become a biochemist and make a median income of $81,000.

Or, instead of all those things, you could become a high school teacher and make a median income of $55,000. Gee, I wonder which one you’re going to do?

Keep that in mind if it sounds ridiculous to you to pay teachers $100,000 salaries.

Even in wealthy schools, teachers are miserable; I have this on direct testimony from my father, who has taught high school in Ann Arbor for almost 20 years now. There are a lot of teachers who believe in making a difference through education, but quickly become burnt out and leave for better working conditions.

I know in my own case that I’m not planning on teaching high school, even though I know I’d be very good at it and I’ve always found teaching very rewarding. I’d actually be qualified to teach several subjects, from mathematics to social studies and even including physics and Latin. Any public school would be thrilled to have me—but probably not thrilled enough to pay me as much as I’d get from a university, international institution, or policy think-tank. So it’s hard for me to justify the career decision of going into public education.

The absolute highest-paid teacher in the Ann Arbor Public Schools is paid $109,000 gross—and Ann Arbor is one of the highest-paying school systems in the nation, and not coincidentally also one of the best. Most of the professors at the University of Michigan are paid over $100,000 gross and some are paid over $300,000. (As a public school, the University of Michigan releases all its salaries.)

So, you’re living in Ann Arbor… you have a graduate degree… you want to work in education; you could either start at $40,000 and maybe work your way up to $100,000 by teaching high school, or you could start at $100,000 and maybe work your way up to $300,000 by teaching college. (Admittedly, to teach in college you generally also need to do research work and probably get a PhD; so it’s not quite an equal comparison. But the most-qualified educators would be good at either job.)

Economics, along with most science and math fields, pays particularly well outside education. This senior economist position at the World Bank pays at grade GG, which is a minimum starting net salary of $102,000.
How can we solve our teacher shortage? It’s really quite simple: Offer higher salaries for teachers. If you want the best-qualified people in your classrooms, you must pay salaries that attract the best-qualified people. If you pay substandard salaries, you’re going to attract substandard talent. “Those who can, do; those who can’t, teach” isn’t a law of nature; it’s a result of public policy decisions to keep teachers systematically underpaid.

Most of the time when people say “It’s just ECON 101”, they don’t actually understand economics very well and likely have not actually taken ECON 101. But this really basically is a question of ECON 101: Supply and demand. If you have a shortage of something, not enough people willing to produce it compared to the number of people who want to buy it, you must raise the price.

Would that be expensive? Yes it would. Doubling the salary of every teacher would raise total spending on education by about 75%, because teacher compensation is about three-quarters of education spending. This would raise US K-12 education spending from about $600 billion per year to more like $1.05 trillion per year, an additional $450 billion per year in public spending, or a little less than $1,500 per American per year. That is not a small amount of money; indeed, it’s about three times what we’d need to end world hunger. And this is actually an underestimate, since we also hope to hire more teachers and should also improve facilities while we’re at it. So a truly comprehensive educational reform project could very well double our total spending on K-12 education to $1.2 trillion.

And if you want to go up there on a podium and actually tell people, “It would be nice to improve our educational system, but we simply can’t afford to do it without raising taxes unreasonably high!” then that is absolutely a reasonable argument to make. There are always tradeoffs in life. At some point, maybe it really isn’t worth spending an extra million dollars to educate one more child. (Is it worth an extra million dollars to educate two more children? Based on net present value of earnings, yes. And frankly I don’t think net present value of earnings even gets close to assessing the true value of an education; it’s a very weak lower bound.)

But I am sick and tired of people saying “Education is our highest priority!” and then refusing to actually spend the money it would take to improve our educational system. This is not a question of “finding solutions”; we know what to do. Raise teacher salaries. Improve schools. Buy new textbooks. People just aren’t willing to actually pony up the cash to do it. They want an easy way out, some simple way of making education better that somehow won’t cost anything. But we’ve been searching for that for awhile now—don’t you think we’d have found it by now?