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We study the effect of immigration of foreign-trained, registered nurses (RNs) on the employment and wages of US-trained RNs. We use the “area” approach and study effects of immigration in labor markets defined by the state. We find substantial evidence that immigration by foreign-trained nurses increases the supply of nurses and that this increase in supply is associated with a decrease in annual earnings. Estimates suggest that a 10% increase in supply due to immigration is associated with a 1–4% decrease in annual earnings, although most estimates were not statistically significant and we did not find a similar association between an increase in supply and wages.

It is widely believed that there is a severe nursing shortage in the United States (US) and that the shortage will remain for many years.1 To address this and similar shortages in the past, the government has eased immigration restrictions on foreign-trained nurses. For example, in 1989, Congress passed the Immigration Nursing Relief Act (INRA) that established a 5-year pilot program to allow foreign-educated nurses to enter the country on H-1A visas. Almost immediately, there was a substantial response to this legislation as over 24,000 immigrant nurses entered the US by May 1989, and many nurses who entered the country through this program adjusted to lawful permanent resident status (Meyer, 2006). This program was ended in 1995. However, in 1999, a new program, H-1C visas, was created for nurses that targeted medically underserved areas. Further, changes in immigration rules in 2003 allowed nurses to enter under H1-B visas. The North American Free Trade Agreement (NAFTA) in 1994 also allowed Canadian nurses to enter the US to work. Partly in response to these policy changes, the proportion of foreign-born among newly licensed registered nurses fell from about 10% in 1995 to close to 5% in 1998, and then rose to close to 15% by 2003 and remained at that level until 2007 (Brush et al., 2004).2 All discussions of solutions to the nursing shortage recognize that immigration will likely play an important role in alleviating current and future nurse shortages (Galessell-Brown, 1998, Berliner and Ginzberg, 2002, Kline, 2003, Aiken et al., 2003, Chaguturu and Vallabhaneni, 2005, Lafer, 2005 and Lopez and Tsitouras, 2009). However, immigration of nurses has long generated concerns among health professionals, nursing advocates, and policy analysts about its consequences (Joel, 1996, Galessell-Brown, 1998, Trucios-Haynes, 2002, Brush et al., 2004, Lovell, 2006 and Blakeney, 2006). Specifically, there is concern about how foreign-trained nurses will affect the quality of patient care, the labor market opportunities of US-trained nurses and the supply of nurses in the sending countries (Immigrant Nurse Relief Act, 1989, Galessell-Brown, 1998, Trucios-Haynes, 2002, Brush et al., 2004, Lovell, 2006, Aiken et al., 2001 and Flynn and Aiken, 2002). Despite its potentially important consequences, there has been little systematic study of the effect of immigration of nurses on the economic opportunities of domestic nurses (Immigration Nursing Relief Advisory Committee, 1995 and Schumacher, 2008). Therefore, public concern and opinion on this issue is largely based on standard economic theory, which predicts that an increase in supply of workers in an occupation should lower wages. However, the available empirical evidence on this issue includes a surprisingly wide range of possible consequences: from immigrants having no adverse effects on the labor market opportunities of US workers to large negative effects (see Edmonston and Smith (1997) for a summary of previous literature; and Card, 2005, Card, 2009, Borjas, 2003 and Borjas and Katz, 2005 for a review of more recent research). Moreover, the effects of immigration in nursing may differ from those found for workers in general, or for workers in other occupations. Thus, it remains an unanswered question as to how immigration of foreign-trained nurses affects the economic well-being of domestic nurses. Answering this question is important because of the vital role that nurses play in providing medical care. If foreign-trained nurses are depressing the wages of domestic nurses, as some advocates claim, then the future domestic supply of nurses will shrink, exacerbate the apparent nurse shortage, and worsen the supposed consequences of the shortage such as poor quality patient care.3 In fact, the widespread use of administered prices in health care (e.g., Medicare and Medicaid) may encourage hospitals and other providers to reduce quality perhaps by substituting low-paid immigrant nurses for high-paid domestic nurses. This may be harmful not only to domestic nurses’ labor market opportunities, but also to consumers (patients) if foreign-trained nurses are of lower quality than domestic nurses. This problem may be particularly important in health care because of the difficulty of observing the quality of care. On the other hand, if foreign-trained nurses are of the same quality as US trained nurses, but willing to work for less, then the same quality of health care can be delivered at lower cost, but this consumer benefit will come at the expense of domestic nurses who will have worse labor market opportunities than otherwise. The objective of this paper is to study the effect of immigration of foreign-trained registered nurses (RNs) on the employment and wages of domestic RNs.4 The nursing context, although narrow, provides a particularly advantageous setting to study the effect of immigration on native workers. Focusing on one, clearly defined occupation alleviates empirical problems that plague research in this area. First, it is straightforward to identify the native workers most affected by foreign-trained nurses: US-trained RNs. The level of competition between immigrants and natives within such a narrowly defined occupation category is unquestionably high. In contrast, studies focused on the effect of immigration on a broader range of native workers, which often classify workers into groups using a few observable characteristics such as education and age, do not accurately identify similar workers competing for the same jobs. This problem may explain why previous studies often fail to find an effect of immigrants on natives, although this is just one possible explanation. Second, by focusing on one occupation it is easier to adjust for demand shifts that may confound the relationship between immigration and wages. Variables that affect the demand for nurses such as the number of hospital admissions and demographic factors related to population health are readily available. Studies of broader groups of immigrants face more difficulty adjusting for potential demand side factors that may affect wages and immigrant location decisions. Third, health care is a highly regulated service industry (e.g., minimum nurse staffing ratios) and there is arguably less scope for firms (e.g., hospitals) to adjust to changes in immigration (supply of labor) by altering the production process and exporting services. Finally, examining the effect of nurses on a skilled occupation such as nursing is of growing interest given the rising levels of education around the world and the increasing migration of skilled workers into the US. In sum, while the narrowness of our study limits its applicability, the empirical advantages associated with this narrow focus improve the internal validity and credibility of the analysis. To accomplish our objectives, we used data from several years of the National Sample Survey of Registered Nurses (NSSRN), which is a dataset uniquely appropriate for this analysis. Unlike the Census, which is used by most previous research to study effects of immigration, the NSSRN provides information on whether a registered nurse works in nursing or in an occupation other than nursing. This distinction is important with respect to identifying the group of nurses affected by immigration because a sixth of all licensed registered nurses work in occupations other than nursing, and occupational choice can be an important adjustment in response to an increase in supply caused by immigration. In addition, the Census does not identify foreign-trained nurses, but only foreign-born nurses. It is the former group that is germane to the study of the effect of immigration on wages. Finally, the Census does not identify nurses with a valid nursing license, which is required to work as a nurse, and the Census is not intended to be representative for narrowly defined occupations within states. We obtained estimates of associations between the supply of nurses and labor market outcomes using an instrumental variables approach. We used the lagged number of foreign-trained nurses to instrument for the current supply of nurses. Our results indicated that immigration of foreign-trained nurses significantly increased the supply of nurses in labor markets defined at the state level. However, changes in the supply of nurses, as a result of immigration, were not associated with wages or earnings in a consistent manner. While there was some evidence that an increase in the supply of nurses due to immigration was associated with a decrease in annual earnings, the same was not true for wages. In addition, most estimates were not statistically significant reflecting, at least partly, the fact that the instruments were somewhat “weak”. Nor was the change in supply associated with the probability of not working in nursing. Overall, our findings are consistent with many of the results in the broader literature that finds a weak association between immigration and labor market outcomes of US-born (trained) workers (Card, 2005).

In this paper, we find substantial evidence that immigration by foreign-trained nurses increased the supply of nurses in labor markets defined by state boundaries. This increase in supply is associated with a decrease in annual earnings. Estimates suggested that a 10% increase in the total number of nurses due to immigration was associated with a 1–4% decrease in annual earnings, although estimates were not always significant. In contrast, estimates provided little evidence that the increase in supply was associated with wages or the probability of not working as a nurse. While there was much consistency in IV estimates of the association between immigration induced increases in the total number of nurses and annual earnings, the absence of similar evidence for wages and the weakness of our instruments limits our ability to draw definitive conclusions. It is possible that measurement error in wages, which depends on self-reported measures of annual earnings, weeks worked per year and hours worked per week, may explain the absence of greater evidence of an effect of immigration on wages. However, an alternative explanation of the pattern of results is weak instrument bias (Bound et al., 1995 and Stock and Yogo, 2005). The partial F-statistics for the instruments in first stage regressions were modest and in the range (e.g., F-statistics ranging from 6 to 10) where the bias due to weak instruments may be problematic. Our results suggest that using immigration policy to solve the current and expected “shortage” of nurses may adversely affect the earnings of US-trained nurses, although the evidence was at best suggestive. While lowering the cost of healthcare may be viewed as a positive outcome given the current concern over the rising costs of healthcare, achieving such a reduction in costs through importing lower-priced, skilled labor will be at the expense of skilled US workers—in this case nurses. Moreover, because the quality of patient care is difficult to observe and measure, there is the additional question of whether immigrant nurses are of the same quality as domestic nurses and whether patient care is being affected by the immigration. This is an area for future research. Our results are consistent with other studies of the effect of immigration on wages and earnings that used the area approach (see among others Card (2009) for a review). Borjas (2003) provides a summary of previous findings: “The measured impact of immigration on the wage of native workers fluctuates widely from study to study (and sometimes even within the same study), but seems to cluster around zero.” (Borjas, 2003, p. 1335) While Borjas’ quote seems apt for our results with respect to wages, we conclude somewhat more in favor of a modest, negative effect of immigration on nurses’ earnings. However, the inconsistency of findings with respect to the effect of immigration of foreign-trained nurses on US nurses’ wages and annual earnings is not easily explained and justifies our cautious conclusion. Our narrow focus had some advantages over previous work. First, we were able to identify workers directly affected by immigration. Second, we had relatively good measures of the determinants of demand for workers that could help identify supply shifts. Third, firms in the health care industry have less ability to significantly alter the production of services given regulatory and institutional constraints. While our approach yielded similarly mixed findings as much of the previous research, this narrower approach may be a productive way to proceed given the empirical problems that characterize studies of broader groups of immigrants.