The role of wages in the migration of health care professionals from developing countries

Nurses

Several developed countries are currently experiencing a shortage of nurses [1]. Shortages are reported to be particularly severe in Canada, the United Kingdom and the United States of America, and these countries are increasingly relying on nurses from the developing world to fill vacancies. For example, of the approximately 16,000 new nursing registrants in the United Kingdom in 2002, over 50% were from abroad. By contrast, only 25% were from abroad in 1998. The five main source countries in 2002 were Australia, India, Philippines, South Africa and Zimbabwe [1].

In the USA, the number of foreign-trained nurses applying for licensure – a proxy measure of inflow into the USA nursing labour market – has increased steadily over the past few years moving from about 6,000 in 1998 to over 8,000 in 2001. The main sources are Africa (mainly Nigeria and South Africa), Canada and the Philippines.

It is much more difficult to obtain data on the outflow of health professionals from source countries. Nevertheless, where data do exist they confirm the upward trend in migration flows indicated by the inflow data from receiving countries. For example, about 4,500 nurses left the Philippines in 1996, compared to over 12,000 in 2001. One third went to the United Kingdom. In South Africa in 1995 there were 511 requests for verification of nursing credentials – a proxy measure of intent to leave the country. By 2000, however, there were over 2,500 requests – a remarkable five-fold increase in five years.

Physicians

The trend in the inflow of foreign physicians differs among the main destination countries. The proportion of foreign-trained physicians has increased slightly over the past 20 years in the USA [2]. Data from England suggest that this might also be the case in the United Kingdom, although the increase is very small. In Australia and Canada, however, the proportion of foreign-trained physicians has decreased quite considerably.

The composition of the migrant physician stock in destination countries has changed over the past few decades. Developing countries are now the main source of migrant physicians in several developed countries. For example, 20% of migrant physicians in the United Kingdom are from Africa. In the USA, 30% of migrant physicians are from India and Pakistan. In Canada, one-third of migrant physicians are from the United Kingdom, but 10% are from South Africa [3].

Out-migration of health care professionals from developing countries is becoming a serious concern for several reasons. First, these countries already have very low stocks of health care professionals. As a result, small absolute losses – 10 or 50 physicians, for example – might be very large relative to the size of the medical workforce.

Second, educational capacity in most developing countries is not large enough to support both increased out-migration and increased domestic supply. In Zimbabwe, for example, there were 737 graduates from nursing programmes in 2001. In the same year, 473 nurses left Zimbabwe to work in the United Kingdom alone. It is not known how many migrated to other destination countries. In 1997, however, only 26 nurses migrated to the United Kingdom and 422 people graduated form nursing programmes. Similarly, 1,200 doctors were trained domestically in the 1990s and of this graduate cohort only 360 remain in Zimbabwe today [4]. Africa, in particular, has limited educational capacity. Of the six WHO regions of the world, Africa has the lowest number of medical schools per population.

The case of nurses in the Philippines is the obvious exception. The Philippines has for many years trained more nurses than are required to replenish the domestic stock, in an effort to encourage migration and increase the level of remittances flowing back into the country. But many health care providers in the Philippines have recently argued that the level of out-migration has become so large that there is actually a shortage of nurses in the Philippines.

Third, source countries in the developing world have very poor health outcomes and are most in need of the services that health care professionals produce [5]. It is particularly troubling that out-migration is increasing in these countries.

Supply of migrants

The supply of migrants depends on a complex set of social, economic and political factors. Among the many variables that influence migration decisions, wages have been shown to have an important impact [6]. Analysis of the supply of migrants is further complicated by the fact that migration is often a family decision, not that of just an individual. For sake of simplicity, in this paper we treat the migration decision as individual.

According to the typical economic approach (see, for example, Clark et al. [7]), an individual will wish to migrate if

W _f - W _d - C >Z

Where C is the direct financial cost of migration, W _f and W _d are the foreign and domestic wage, respectively, and Z is the compensating differential in favour of staying in the source country. The compensating differential captures all non-wage factors that are important to the migration decision. It will vary across individuals but, on average, will be positive. This simply means that all else equal, individuals prefer to remain in their home country.

One can expand this specification and recast it in terms of utility to take account more explicitly of the non-monetary job attributes affecting migration. An individual will wish to migrate if

U(W _f , J _f ) - U(W _d , J _d ) - C >Z

Where J represents "working conditions" – non-wage job characteristics people value, such as safety, lack of stress, opportunities for advancement, prestige, housing or transportation – and C is the financial cost of migration expressed in utils.

According to this specification, the compensating differential includes all factors other than wages, working conditions and direct moving costs that might influence an individual's attachment to his home country. These factors – collectively referred to as "living conditions" – can be divided into country-specific and individual-specific components. The country-specific or national components (N) would include such factors as crime rates, availability of schools for children, language spoken and the availability of clean water in the source and destination country. The individual-specific or personal components (P) would include such factors as presence of family, patriotism and the size of a person's social network in the source and destination country. Both of these categories include observable and non-observable factors.

Thus, the migration condition can be rewritten as

U(W _f , J _f ) - U(W _d , J _d ) - C >N + P

The supply of migrants is an increasing function of the foreign wage and foreign working conditions and a decreasing function of the domestic wage, domestic working conditions and direct moving costs. The supply of migrants is also a decreasing function of the compensating differential (N + P) so that an improvement in domestic living conditions is expected to decrease the supply of migrants, all else equal.

The relationship between wages and the supply of migrants is summarized by the supply curve depicted in Fig. 1. The relevant price is the ratio of the foreign wage to the domestic wage – the "wage premium". The relevant quantity is some measure of intent to migrate such as the number or fraction of the health care professionals wishing to migrate (M).

Further, if marginal utility with respect to income is diminishing – as is commonly considered the case – then beyond some high premium level, theory predicts that the supply curve will become very steep. If this is the case empirically, then in this range of the wage premium, altering the premium will have little impact on intent to migrate.

If the compensating differential is positive (i.e. people prefer to remain in their native country, all else equal), and direct moving costs are positive – both reasonable assumptions – then wages in the source and destination country do not have to be the same in order for the supply of migrants to be zero. This is illustrated in the graph with a supply-curve intercept greater than one.

The only purpose of this basic model is to illustrate in a simple way that there are different policy options available in source countries to decrease the desire among health care professionals to out-migrate. First, the domestic wage can be increased. This is represented in the model as a movement along the supply curve. It is clear that the effectiveness of this option depends crucially on the elasticity of supply at the relevant premium level. Second, working conditions can be improved. This would shift the supply curve to the left. Finally, living conditions can be improved or direct migration costs can be increased. This would also be represented by a leftward shift in the supply curve.

In general, the living conditions of a country are exogenous to the health care sector. Improving economic conditions, lowering crime, improving housing and schooling, making people believe in "a future", etc., are policy options that must be executed at higher levels of leadership. Thus, working conditions and wages in the health care sector are the most feasible policy levers.

Demand for migrants

The demand for migrant health care professionals on the part of destination countries depends on several factors, many of which are outside of the health care system. Immigration policy is driven by political factors, concerns for security, domestic birth rates, the state of the economy and war (both at home and abroad), to name a few factors. Nevertheless, it is well documented that in the main destination countries, labour market conditions have an influence on the number of migrant professionals allowed into the country [7–9]. For example, until recently, Canada maintained a list of occupations within which employment vacancies were evident. Potential immigrants working in one of these occupations would have a much higher chance of being granted entry than if they worked in a non-listed occupation. In the USA, certain visa categories have been created to allow persons with certain qualifications to enter the USA more easily.

The health care sector is no different. For example, based on a report in the early 1990s in Canada, the government took the view that there were too many physicians in Canada. As a result, in addition to decreasing medical school enrolment the government lowered the number of physicians admitted into the country from abroad.

There are large numbers of unfilled vacancies for nursing positions in Australia, Canada, the United Kingdom and the USA [1, 10, 11]. These nursing shortages are so large – and are forecasted to grow at such a rate – that many believe current domestic training institutions simply cannot produce enough nurses to remedy the situation. This is due to several factors. Many claim that nursing requirements will increase in the near future due to population ageing and technological advancements in medicine. Concerning population ageing, however, there is little evidence to support such a claim [12]. In terms of the capacity to produce more nurses within the main destination countries, population demographics are changing so that there are simply fewer young people [10, 13]. This means that the pool of candidates for nurse training programmes is decreasing. Furthermore, educational institutions in Canada and the USA have been under fiscal pressure over the past decades and have reduced enrolment, although recently this trend has been reversed. Nurse training programmes have also increased in length and nursing is no longer the prestigious profession that it once was. Young women now have more career options and as more enrol in engineering, information technology and commerce programmes, fewer enrol in nursing [14].

Even if domestic institutions within destination countries were able to produce enough nurses and physicians to fill vacant positions, health care professionals from abroad are often viewed as a less costly substitute, since governments in source countries underwrite education costs. This is especially relevant in the current climate of health care cost containment that is apparent in the main destination countries. The actual degree of substitutability between a domestically trained health care professional and a migrant is open to some debate. It is expected to increase as training programmes in developing countries grow more and more similar to those in the main destination countries. However, some argue that domestic programmes are tailored to the specific health care needs of the country and that foreign-trained medical staff do not provide the same quality of care.

The majority of nursing programmes in Bangladesh, the Philippines and South Africa, for example, are based on curricula from United Kingdom or USA nursing schools, and classes are held in English. Many provinces in Canada keep a list of designated countries where medical training is thought to be equivalent to that of Canada. In some provinces it is incorporated into legislation, while in others, licensing bodies are permitted to use their discretion.

The overall situation for physicians does not appear as severe as for nurses. However, shortages are evident in some regions, most notably rural areas. In Canada, the United Kingdom and the USA it is increasingly difficult to recruit and retain domestically trained physicians in rural areas. Migrant physicians, however, seem quite willing to take up these remote postings and recruitment campaigns are often focused on filling rural vacancies [15].

Shortages are also evident in some medical specialties. Several recent reports have highlighted increases in the number of unfilled vacancies in certain specialties as well as in rural areas in Canada and the USA [16, 17]. Some governments are reacting by fast-tracking foreign-trained specialists through certification or domestic licensure processes [18].

As a result of these trends, the demand for migrant nurses and physicians in Australia, Canada, the United Kingdom and the USA is thought to have increased over the past few years. In the supply and demand framework, this increase is represented by a rightward shift in the demand curve depicted in Fig. 1. Note that the demand for migrant health care professionals is independent of the wage premium. This reflects that although the demand for health care professionals in destination countries might be sensitive to health care wages, the demand for foreign health care professionals, per se, is not expected to be.

Market clearing

It is unlikely that the labour market for migrant health care professionals is in equilibrium. This is for several reasons. Health care wages in the public sector – where most health care professionals are employed – are often set through some form of collective bargaining. These agreements typically last two to three years, during which wages are not negotiable. Furthermore, wages in the health care sector tend to be closely linked to the broader public sector wage structure. As a result, factors outside the health care labour market often lead to changes in health care wages. Wages for migrant health care professionals in destination countries might be more flexible than health care wages in general. This might happen if, for example, migrant health care professionals worked mainly in the private sector in destination countries where employees are not covered by collective bargaining agreements.

But even if wages were perfectly flexible, the equilibrium flow of migrant health care professionals (M*) might not be feasible, due to constraints on migration flows. This is illustrated in Fig. 2. As noted earlier, while migration policy is sensitive to labour market conditions, it depends on a host of other factors. For various reasons, destination countries often set quotas on the total number of immigrants admitted into the country each year and the quota must be divided across several occupations other than health care and, in some cases, countries. Thus, there could be a quota on the number of health care professionals allowed into the country (Q*) that is binding.

The fact that the labour market for migrants is not in equilibrium has important policy implications. If there is an excess supply of migrants in a source country – i.e. the number of health care professionals willing to leave the country is greater than the number destination countries are willing to admit – then any sort of supply-side policy will have little or no impact on actual migration flows. This is because the flow is constrained by the demand for migrants in destination countries. Of course, supply-side policies in source countries (e.g. raising domestic wages, improving working conditions) will affect intent to migrate, but this is likely to have no impact on actual flows. On the other hand, in situations where there is an excess demand for migrants, raising domestic wages or improving working or living conditions will reduce migration flows.