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The Fraser Institute

Inflated non-medical labour costs are reducing access to health care

Contact:

Michael Walker, Executive Director
The Fraser Institute (604) 714-4545
Email michaelw@fraserinstitute.ca

For Release: 11 January 2002

VANCOUVER, BC— Hospitals in BC could save $150 million a year, and use those savings to improve health care availability, if they paid their non-medical support staff wages that are competitive with similar positions in the private sector. This is one of the findings of research summarized in an article released today "Labour Costs in the Hospital Sector Revisited." The article was published in the January issue of Fraser Forum, The Fraser Institute's monthly magazine.

"The problem of wage premiums in the health care sector is a direct result of government management, where political power, rather than economic competition, determines salaries," says Michael Walker, executive director of The Fraser Institute.

According to Statistics Canada, BC spent $5 billion on health care in 2000/01, of which $2.7 billion went to hospital care. The wages and benefits paid to hospital workers account for almost 75 percent of hospital care expenditures (not including fee-for-service practitioners who are paid under the Medical Services Plan).

The article compares unionized hotel workers to employees at the Vancouver General Hospital (VGH) and UBC Hospital (UBCH) in order to illustrate the potential savings. Of the 2,609 full-time equivalent Hospital Employees' Union (HEU) employees at VGH and UBCH, there are 1,678 support workers (64 percent) who require no specialized or medical training for their work.

"Many jobs in the hospital support sector are similar to those in the unionized hospitality sector. Both hotels and hospitals need food service personnel, cleaners, maintenance workers, cooks, and clerks," says Walker.

Of the 1,678 non-medical workers at VGH and UBCH, 578 fall under 13 job titles that are directly comparable to those in the hotel sector. If comparable HEU employees were paid a similar market wage, the two hospitals could potentially save $2.9 million a year.

If the remaining 1,100 full time non-medical employees were to be paid a wage competitive with their hotel counterparts the savings at VGH and UBCH could amount to an additional $5.5 million annually.

"This means a minimum potential savings of approximately $8.4 million, or roughly 8.5 percent of the total HEU wage bill, at these two hospitals," says Walker.

Other hospitals in BC would likely save a proportionate amount. Assuming that the percentage of non-medically trained support workers at VGH and UBCH is representative of the distribution of workers in other hospitals across BC, the potential savings from paying competitive wages to non-medical support workers is approximately $150 million a year. That means a potential savings of 5.6 percent of provincial expenditures on hospital care could be realized if support staff wages were competitive.

"There is no explanation for why BC taxpayers must pay hospital bakers a 32 percent premium over their hotel counterparts, or why hospital payroll clerks receive a 39 percent premium," notes Walker. "At a time when scarce medical personnel are leaving the country because their wages are lower than the market wage, it is silly to be paying wage premiums to non-medical staff who can be easily replaced," he concludes.

 


Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver with offices in Calgary and Toronto.