Where Time (& Wages) Stood Still

See the latest issue of Briefings at newsstands or read in our new format here.

By: Rupak Bhattacharya

It sounds like the hiring frenzy of 2021. Firms clamoring for software engineers and paying as much as $250,000. Or hospitals flying nurses across the country to the sun-kissed beaches of California to work for double their hourly wage. The odd reality? It’s actually 2023.

With the Great Resignation fading and the economy’s problems replacing it, the old salary wars that kept CFOs up all night have become a thing of the past—almost. In a surprising few pockets like healthcare and tech, salaries have remained elevated. “Hospital labor costs are still significantly higher than they were prepandemic,” says Bharath Krishnamurthy, the American Hospital Association’s director of policy and health analytics.

Indeed, hospital labor costs in Texas have ballooned 255% between 2019 and 2022, causing hospitals to hover dangerously close to the red on their balance sheets. Similarly, despite recent layoffs, tech firms continue to fight over talent with specialized skill sets such as cybersecurity and artificial intelligence. The root cause for these outsized paychecks comes down to a classic pipeline shortage. There were over 700,000 US cybersecurity job openings late last year, and thanks to a reported pandemic burnout, travel nurse job postings rose 119% from 2019 to 2022.

All of which creates some enormous challenges for talent-hunters. At one hospital system, “we’re doing nurse recruitment where a nurse with no management experience made $500,000 last year,” says Greg Button, Korn Ferry’s President of Global Healthcare Services.

In the short term, experts say there is no silver bullet to fix these labor imbalances, and companies should expect to cut some hefty checks in the near future if they’re short staffed in critical areas. Down the road, however, experts say firms can avoid this issue if they take more responsibility for driving people into their workforce pipeline via free training programs to become a tech or a nurse. “The bigger solution is to create easier paths for individuals,” says Button.

Experts also advise companies to assess whether third-party firms are helping or hindering their bottom line. The American Hospital Association, for example, claims that nurse staffing agencies began overcharging during the pandemic, making larger profits at the hospitals’ expense. “In many cases, staffing agencies are not paying nurses more—they’re charging hospitals more and then retaining that margin for themselves,” says Krishnamurthy. (For their part, nurse recruiting agencies maintain that their fees are necessary to meet the costs of their business.)

In response to this issue, Rush University Medical Center replaced outside agencies with their own in-house nurse staffing team to reduce their spend. According to Angelique Richard, Chief Nursing Officer, SVP, and COO, the Center made nurses temporary employees, paid them $100 an hour for 13 weeks, and at the end offered to transition them from a temporary position to a permanent one. This enabled Rush to get nurses into the pipeline fairly quickly while still avoiding higher agency rates, which Richard adds had previously been as high as $200 an hour. “That was one program that was and is wildly successful.”