Health Sector Labour Market Dynamics and Multi-Employer Collective Agreements

Abstract

How New Zealand’s health-sector labour markets interact with District Health Board (DHB) Provider Arms is my thesis’ focus. Using health-service delivery data, workforce data, and DHB monthly financial information, I estimate the DHB Provider Arm economic production process and the interaction between DHBs and the health-sector labour and capital input markets.

Production and input market interactions are modelled through simultaneously estimating a DHB production function together with the first order conditions for cost-minimisation in an econometric system-of-equations. Estimating a system-of-equations allows labour and capital market prices to interact with DHB marginal input productivities according to the first order conditions of cost-minimisation. Nationally-determined MECA labour prices influence health service output through their equality to DHB production-based input marginal productivities.

Medical and nursing labour appears to have inelastic labour demand, providing scope for unions in those sectors to exploit market power. DHBs are employing fewer workers than they would and paying more for each worker than they should if the labour market was more competitive. New Zealanders are receiving less health care then they might, and experiencing more morbidity then they need bear, from the workforce restrictions generated in the health sector's labour market. The passed-through inflated labour costs are borne by taxpayers, who lack options for alternative provider care.

The non-competitive labour market induce secondary labour market effects. Overseas-trained medical labour, attracted into New Zealand by above-competition wages, are denied employment within medical-skill-hungry DHBs. Graduate nurses over-supply a quantity-constrained labour market, generated entrenched unemployment. DHBs are induced to be allocative and technically inefficient through price distortions, creating higher output costs and an inefficient production input mix.