Model essay (a): why a nurse shortage lasts

What this lesson teaches

• I can find the equilibrium price and quantity where demand meets supply.

  Syllabus 9570, 2.1.2(e). Demand and Supply Analysis and its Applications: The equilibrium market price and quantity are determined by the interaction of demand and supply

• I can work out how shifts in demand or supply change price, quantity, spending, revenue, consumer surplus and producer surplus.

  Syllabus 9570, 2.1.2(f). Demand and Supply Analysis and its Applications: Changes in demand and supply can affect equilibrium price and quantity, consumer expenditure, producer revenue, consumer surplus and producer surplus

Make a guess

Hospitals raise nurses' pay, but vacancies stay unfilled for years. What is the main reason?

1. The pay rise was too small to draw nurses from other hospitals or careers.
2. Training takes years, so supply responds slowly while demand keeps rising.
3. Nurses care more about hours than pay, so higher wages cannot help.

The answer to part (a)

Introduction

The wage of nurses is set in a labour market. Hospitals and nursing homes demand nurses, and trained nurses supply their labour. A shortage exists when, at the going wage, employers want to hire more nurses than are willing to work. A shortage can continue after a pay rise for three reasons: demand keeps rising, supply responds slowly, and wages are raised less than the market needs.

Paragraph 2: demand keeps rising

The demand for nurses is a derived demand. It comes from the demand for healthcare. Singapore's population is ageing quickly, and older people need more care, both in hospital and in nursing homes. More people also live with long-term illnesses such as diabetes. So at every wage, employers want more nurses than before, and the demand curve shifts right from DL0 to DL1 in Figure 1. Because the population keeps ageing, this shift happens year after year, not once.

Paragraph 3: supply responds slowly

The supply of nurses is wage inelastic in the short run. A higher wage may persuade some nurses to delay retiring or work extra shifts, but new nurses take years to train. So the quantity supplied rises only a little when the wage rises: a movement up a steep supply curve. Non-wage factors also hold supply back. Nursing involves long shifts, night work and heavy workloads, and after the stress of the COVID-19 years some nurses left the job. These push supply to the left, working against the pay rise.

Paragraph 4: wages rise too little

Many nurses work in public hospitals, where pay follows salary scales set within budgets and reviewed only from time to time. So wages do not jump straight to the market-clearing level. In Figure 1, the market cleared at E0 before demand rose. After demand shifts to DL1, the market-clearing wage is We. If pay rises only to W1, below We, employers want Ld nurses while only Ls are willing to work. The shortage, Ls to Ld, is smaller than at W0 but has not gone. If demand rises again next year, the gap widens once more.

Conclusion

A shortage of nurses can continue after a pay rise for three reasons. An ageing population keeps pushing demand up, the supply of trained nurses responds slowly, and pay set by salary scales rises less than the market needs. The pay rise narrows the shortage but does not close it.

Margin notes: how each paragraph scores

Introduction

Defines the labour market and a shortage, and gives the three reasons the answer will develop. The examiner sees a structured answer at once.

Paragraph 2

Uses derived demand, a key labour-market idea, and Singapore's ageing population. Notes that the shift repeats, which is what makes the shortage last.

Paragraph 3

Explains wage inelastic supply through training time, and separates a movement along the curve from a shift caused by working conditions. This precision is L3 rigour.

Paragraph 4

Uses every label in Figure 1 to show why W1 still leaves a shortage. The point about pay scales explains why wages do not simply clear the market.

Conclusion

Ties the three causes together. No evaluation marks are available for a 10-mark part.

Overall: L3, 9 or 10 marks

Both sides of the market explained, with a correct labour-market diagram and context. Explaining only the rise in demand, with no reason why the pay rise falls short, would cap the answer at L2.

Worked example: A 3-minute plan

Two parts to explain: the shortage, and why the pay rise did not end it.

1. Intro: labour market; derived demand; a shortage means demand exceeds supply at the going wage.
2. Demand: ageing population, more chronic illness; DL shifts right, again and again.
3. Supply: training takes years, so supply is inelastic; hard shifts and burnout push nurses out.
4. Wages: set by pay scales and budgets, adjusted slowly; W1 below We (Figure 1).
5. Close: demand rising, supply slow, wages sticky.

Watch out for this

If wages rise, more people will train as nurses, so the shortage disappears at once.

Training takes years, so the supply of nurses barely responds in the short run. The extra pay brings in few nurses quickly, while demand keeps rising.

Check your understanding

Why does the supply of nurses respond only a little to a wage rise in the short run?

1. New nurses need years of training, so few extra can start work within a year.
2. Nurses do not care about pay, so wages have no effect on supply.
3. A wage rise shifts the supply curve left, so fewer nurses want to work.