Sam Watson’s journal round-up for 18th July 2016

Every Monday our authors provide a round-up of some of the most recently published peer reviewed articles from the field. We don’t cover everything, or even what’s most important – just a few papers that have interested the author. Visit our Resources page for links to more journals or follow the HealthEconBot. If you’d like to write one of our weekly journal round-ups, get in touch.

Mortality inequality: the good news from a county-level approach. Journal of Economic Perspectives [RePEcPublished Spring 2016

Research on mortality trends always focuses on the bad news. For example, in a well publicized article Anne Case and Angus Deaton report on finding significant increases in mortality for middle-aged white non-Hispanic men and women in the US.  (Although this article did attract some criticism for bias due to aggregation of age groups.) This essay by Janet Currie and Hannes Schwandt takes an altogether different line: it suggests that there is good news on the whole. Examining life expectancy at birth it is shown that mortality inequality between rich and poor counties declined significantly between 1990 and 2010. However, mortality rates and inequality in life expectancy have shifted a lot less for older age groups – a factor many previous ‘bad news’ type studies have focussed on. One explanation for such a trend is that there has been more smoking cessation in wealthier areas.The authors conclude then that for the youngest people, inequality is likely to remain low, while for older generations positive health behaviours such as smoking cessation are also likely to spread, improving inequality in mortality. However, one might suggest such conclusions are overly optimistic. Poverty and low socio-economic status have a complex relationship with health; reductions in mortality at lower ages may create a survivor bias so that the overall cohort has worse health on average now as those in poor health who may have died a number of years ago now survive to older ages. Nevertheless, Currie and Schwandt are right to suggest that policy makers should be made aware that improvements in mortality are possible and that evidence such as this should be used to mobilise efforts to improve the health of high risk groups.

The tax-free year in Iceland: A natural experiment to explore the impact of a short-term increase in labor supply on the risk of heart attacks. Journal of Health Economics [PubMedPublished 23rd June 2016

In 1987, owing to a change in the tax system in Iceland, no-one had to pay income tax. As a result labour supply increased substantially, which provides a neat natural experiment. In this study, the authors aim to examine whether increased labour market participation increases the risk of acute myocardial infarction (AMI). There is a growing literature of the relationship between macroeconomic conditions and health; a seminal article was Christopher Ruhm’s 2000 study that showed that economic downturns are associated with decreases in the overall mortality rate. However, the mechanisms that mediate such an effect remain elusive. Using panel data on individuals from 1982-92 linked to data on coronary events the authors show an increase in the risk of AMI in both 1987 and 1988 among men. However, some of the results seem improbably large, e.g. a 149% increase in the probability of AMI among self-employed men aged 45-64. While taken as a whole I think the evidence does suggest an increase in AMI risk in 1987, I was left with a number of questions: why no individual effect in the specification?; could the errors be serially correlated?; why wasn’t an instrumental variable approach used if the motivation is that the 1987 policy exogenously shifted labour market participation?; aside from having lower average risk, is there any reason to separately analyse men and women? These results also contradict an earlier study, also from Christopher Ruhm, that showed unemployment was associated with increases in deaths from coronary heart disease. At the very least, this study shows us that we just don’t really understand the complex interplay between economy, society, and health.

Gender roles and medical progress. Journal of Political Economy [RePEcPublished 3rd May 2016

Over the past century female labour market participation has improved as restrictive female gender roles have shifted and technological innovations have reduced the burden of many tasks traditionally assigned to women. Ha-Joon Chang posits that the invention of the washing machine was a more important invention than the internet in the way it revolutionised the labour market. This paper argues that the reduction in maternity conditions as a result of medical progress over the 20th century had a significant impact on female labour market participation. Indeed, they estimate that medical progress can account for 50% of the rise in female labour market participation between 1930 and 1960.

Photo credit: Antony Theobald (CC BY-NC-ND 2.0)

Nurses on strike

Monday saw the first strike by health service staff in England and Wales for 32 years. This dispute surrounds the refusal of the government to implement a 1% pay rise recommended by the NHS pay review body. The reason for not awarding the pay increase given by the Secretary of State for Health, Jeremy Hunt, was that it is “unaffordable”.

There are a number of intersecting interests involved in any industrial action such as this where various stakeholders have a number of positions to consider. For example, the Secretary of State for Health must balance his mandate to protect public health with political considerations such as re-election and positioning within his party. The reasons for rejecting the pay increase, however, are typically given an economic flavour; in particular, Jeremy Hunt warned that an increase in pay this year may lead to the laying off of a large number of nurses next year, leading to a reduction in the quality of care. But, an examination of some of the economic issues surrounding the rejection of pay increases in the healthcare sector may suggest that the driving forces are more likely to be of a political nature.

In England and Wales, the wage paid to nurses is regulated by the state, and is homogeneous across all areas regardless of the local wage rate. Propper and van Reenen (2010) showed that in areas where the regulated nursing wage is lower than the ‘outside’ market wage there are reductions in the quality of nursing staff and hence healthcare quality, which they measured using hospital mortality rates for acute myocardial infarction. Moreover, they found that ‘the effect is “convex” in that the negative effect of regulation on hospital quality is much stronger in the high-cost areas (where regulated wages are much lower than the outside wage) than the positive effect in the low-cost areas (where regulated wages are higher than the outside wage).’ While these findings may be used to argue against a nationally regulated pay structure for health service staff, they certainly suggest that suppressing the nursing wage is likely to have deleterious consequences to patient health outcomes.

Much of the reasoning behind reducing pay is to do with constraining expenditure in the healthcare sector which, across most developed countries, is rising as a proportion of GDP. Nonetheless, there are sound arguments as to why we might expect healthcare to take up an increasing proportion of national expenditure, and furthermore, why this is not a worry. In particular, the Cost Disease argument (which has been previous discussed here and here), suggests that healthcare will take up a bigger and bigger proportion of the GDP pie, but that this pie will grow at least as quick. This is, in part, due to the low marginal rate of substitution between capital and labour and less than average rate of productivity growth in the healthcare sector. If these arguments hold, then governments may be unnecessarily reducing real terms health expenditure. Indeed, in many cases the government targets for NHS spending are wholly unrealistic (Appleby, 2012).

There have certainly been changes to the composition of the labour force in the healthcare sector. The density of nurses has declined from 12.21 per 1,000 people in 1997 to 8.93 per 1,000 people in 2013 while the density of physicians has increased from 2.3 to 2.79 per 1,000 over the same period (World Health Organisation – data here). This may perhaps reflect a replacement of some nursing tasks with capital or the evolving nature of medical care. However, in many areas, recommended nurse to patient ratios are not met; for example, in neonatal care, one recent survey of neonatal units found that 54% of observed shifts were understaffed with respect to recommended nurse to patient ratios (Pillay, 2012). However, given the relative lack of evidence on the cost-effectiveness of nurse to patient ratios, it cannot be said that the reduction in total nursing labour is the result of calculated cost-effectiveness decisions.

Taken together, it would seem that suppressing the nursing wage rate, or reducing the number of nurses, would have negative consequences on patient outcomes. There may certainly be an argument that the losses in quality are worth the costs saved, whether you agree with it or not, but no evidence has been presented to support this point. At a macroeconomic level, the austerity plan presented by many Western governments, the UK’s included, is rejected by a large proportion of economists.* As many economists and commentators have suggested the austerity programme is likely to be used to satisfy political ends rather than economic ones.** The reduction (in real terms) of the nursing wage may support political gains at the expense of healthcare quality and worse patient outcomes.

*For a discussion of these issues and numerous links, see the blogs of Paul Krugman, Simon Wren-Lewis, Martin Wolf, Jonathan Portes, and Chris Dillow among many others.

**Again, this wide ranging discussion is captured by many commentators, see, for example, here and here, from the above mentioned blogs, and this article.