The Job Openings and Labor Turnover survey released by the government last week underscored continued tightness in the health care labor market through June. Health care organizations added 60,000 employees, after accounting for employee departures. Total job openings across the ecosystem increased by 10,000.
Since 2014, total job openings in health care have more than doubled to 1.2 million from 537,000. On average, the industry adds about 40,000 employees to its ranks per month. The last three months have outperformed this average, and in April, as many as 72,000 jobs were added.
However, at the current pace it would take about 20 months to resolve the industry’s labor shortage, assuming job openings did not increase. The chart below illustrates how the number of job openings in health care is generally growing faster than the net additions to the ecosystem.
Increased compensation does not appear to have attracted sufficient numbers of new employees to the industry. Over the same period described above, average hourly earnings increased across the health care and social service sectors by 12.6%, with the hospital-based subcategory showing the largest increase at 13.1%.
Boosting wages is unsustainable
Even if they could be assured that boosting wages would attract much-needed workers, many providers are unable to continue this pace of wage increase. According to Optum’s 2018 Almanac of Hospital Financial and Operating Indicators, the median operating margin for all hospitals in the United States was 0.46% in 2016. Urban hospitals and those with the largest net revenue bases tend to have the strongest margins, as high as 4.9%. These margins are insufficient to support double-digit wage increases in the long term.
Health care organizations, particularly providers, will have to consider nontraditional means of attracting the relatively few unemployed people to join their ranks.
Furthermore, providers that seek to increase wages to attract new employees must realize they are also competing against other industries for talent, in some cases. The average operating margin among S&P 500 companies is 13.25%. Therefore, even in the short term, providers may be unable to sustain attracting and retaining talent by increasing compensation since other industries will likely be able to increase compensation even more.
Health care organizations, particularly providers, will have to consider nontraditional means of attracting the relatively few unemployed people to join their ranks. Mission-driven providers should consider educating the local workforce in the community where they operate and encourage like-minded individuals to be part of that mission. Such communication can represent a great advantage in attracting and retaining talent, which is particularly beneficial because mission-driven providers often have even lower operating margins and may be less able to compete for talent purely through compensation. Such an approach offers the additional benefit of boosting good will between health systems and the communities they serve.