NHS' Bargaining Power Is a Blessing And a Curse
We often talk about the great benefits of the NHS’ monopsony power when it comes to scoring us bargains on American pharmaceuticals. By being the main British buyer of drugs, the NHS holds bargaining power to drive down the prices far below that that American consumers pay. But the NHS monopsony power can have ominous impacts on the UK too.
Another respect in which the NHS is a Great British monopsony is in being the main buyer of healthcare work - the main employer of healthcare professionals. This primarily achieves the pushing down of nurses’, doctors’ and other healthcare professionals’ wages and salaries. This has worked for a time. But it can only go so far. Medicine becomes a far less attractive career for talented Brits to pursue. And British doctors increasingly flee abroad, leaving the UK distinctly losing the skills war when it comes to healthcare.
The NHS’ outsized role in the healthcare labour market has created a shortage of labour which has repercussions for us all.
When our labour market has experienced both record vacancies1 and low unemployment, the main culprit is the surge in economic inactivity. By far the greatest cause of that surge is health related.
If we are to continue our use of the NHS, we must acknowledge the limitations of its bargaining power being abused too far. Continued artificial driving down of healthcare wages is not anti-inflationary as some claim - we’re suffering in health outcomes and in labour supply. It may even be inflationary.
Until recently