A decade of pay erosion: The destructive effect on UK nursing staff earnings and retention – October 2022

Practice area: Education and Labour Markets
Client: Royal College of Nursing
Published: 28 October, 2022
Keywords: 2022 agenda for change inflation Labour Market Economics Nurse's Pay

London Economics were commissioned by the Royal College of Nursing to undertake a detailed analysis of the evolution of registered nurses’ and nursing support workers’ NHS Agenda for Change pay over the last decade, across the UK.

The analysis provides an evidence-based assessment of the extent to which remuneration in the nursing profession has been impacted by years of pay stagnation and the current cost-of-living crisis. In addition, the analysis addresses a number of common misconceptions about the relative outcomes of nurses compared to other occupations; the particularly damaging effect of inflation on nurses; the relationship between turnover rates amongst the nursing profession and pay settlements; as well as the true costs to the Exchequer associated with ever-increasing nurse vacancies.

The report finds that:

  • Between 2010-11 and 2022-23, nurses’ salaries in England, Wales and Northern Ireland at the top of Band 5 and Band 6 on the Agenda for Change (AfC) framework have declined by at least 20% in real terms. A similarly large decline applied to nurses in Scotland (based on the June 2022 pay award). In other words, an experienced nurse in 2022-23 is being paid the same amount for 5 days’ work as for 4 days’ work in 2010-11.
  • Real earnings for nurses have lagged behind employees in other professions in the United Kingdom, particularly those in the private sector. In the private sector, real median earnings fell by 3.2% between 2011 and 2021, while nurses’ median earnings fell by 6.0%.
  • From April 2020 to July 2022, the price of unavoidable expenditure items (which account for more than one third of a typical household’s expenditure) increased by approximately 17.1%. This is significantly higher than the nominal pay rise that an experienced NHS nurse in England, Wales, Northern Ireland (7.6%) and Scotland (9.2%) experienced over the same period.
  • From 2010-11 to 2021-22, as nurses’ salaries in England declined substantially in real terms, the annual leaver rate for nurses and health visitors increased from 8.5% to 10.9%. Comparing the trend in the leaver rate and real-terms salary growth over time (excluding the COVID-19 pandemic), the analysis suggests that there was a strong correlation between the two measures (-0.75). This suggests that decreases in real salaries are strongly associated with increases in the leaver rate.
  • There are very significant costs to NHS organisations associated with nurse turnover:
    • International recruitment (the current main recruitment method adopted by the UK Government) costs approximately £16,900 more than the cost of retaining a nurse in 2021-22 – and also 2.4 times the cost of a 5% + RPI pay rise (which was estimated to be £7,100 including on-costs).
    • In the short term, NHS organisations can cover vacancies using a mix of agency and bank staff, or through paid overtime; however, again, these options are very costly. Agency nursing costs NHS organisations around £21,300 per year more than the current cost of a permanent nurse, while bank nursing costs around £5,100 more per year. An even split between bank and agency nursing would imply an additional cost of £13,200 per year, which is 1.9 times the cost of a 5% + RPI pay rise.

In addition to the erosion of real wages, the recent fundamental changes to the English student loan repayment system will adversely impact both prospective nurses entering the profession as well as nurses who have already taken out and are repaying student loans.