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Alleviating Worker Shortages Through Targeted Subsidies: Evidence from Incentive Payments in Healthcare

Ashvin Gandhi¹; Andrew Olenski²; Krista Ruffini³; Karen Shen⁴

¹ UCLA & NBER · ² Lehigh University · ³ Georgetown University, NBER · ⁴ Johns Hopkins University

Abstract Worker shortages are common in many industries. This paper examines the effect of government subsidies to address these shortages in the context of a reform that tied Medicaid payments to nursing home staffing levels. We find that the reform substantially increased staffing, especially for facilities serving many Medicaid patients. Facilities responded primarily by hiring workers in lower-wage roles rather than increasing hours of incumbent or high-wage staff. This contrasts with null effects we estimate for a non-incentivized rate increase, suggesting that the incentive structure of government payments—rather than just the level—is key to boosting employment in sectors facing worker shortages.

DOI

10.1162/rest_a_01530

Pages

1-31

Language

en

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