sector and find acceptable jobs. Labor economics predicts that as the level of compensation offered increases, more qualified workers should be willing to become employed as health professionals (WHO, 2012; Andalon and Fields, 2013). In turn, higher wages encourage more students to apply for health professional education, and increase the demand for medical training and eventually the number of skilled professionals available. In a global labor market where workers’ skills may be transferable across country boundaries, migration flows also play an important role in determining the supply of health workers within a country. In particular, outflows of health professionals from low and middle income countries to other, more attractive markets offering better compensation have been identified as one of the biggest challenges facing health systems (Chen et al. 2004; Vujicic and Zurn 2006).

Traditional labor economic analyses assume that, in well‐functioning labor markets, disequilibrium (i.e., imbalances between demand and supply) is short‐lived. A core assumption is that the wage rate is flexible and freely adjusts the incentives to both employers and health workers to influence their employment behavior and preferences such that equilibrium is restored. Figure 1 depicts a static health worker labor market in which employers’ demand (D) to employ health workers interacts with the health workers that are available to supply (S<sup>1</sup> ) their labor to determine the market wage rate (W*) and number of workers (H*) that will be employed. Countries face a binding constraint on the amount of financing available to employ more health workers, and resource constraints are more severe in lower income countries. A shortage of workers obtains, for example, when a wage rate (W<sup>L</sup> ) is lower than the market optimum (W*), or when the number of workers supplied (H<sup>S</sup> ) falls below the number demanded (H<sup>D</sup> ). All else being equal, shortages in this market could be alleviated through: (1) additional compensation to increase wages to W* and attract more workers into the market; and/or (2) increasing the production of workers or import of workers from external markets to shift the supply curve outward (S<sup>2</sup> ) while keeping wages at W<sup>L</sup> .

In reality, markets can fail to “clear” because prices are either not flexible, or demand and/or supply does not readily adjust to price signals. As pointed out by McPake et al. (2014), both types of rigidities are common in the health labor market. The price of labor in the health sector is often not flexible because wages in the public health sector (often the largest employer in many countries) are usually set by legislative processes and tied to civil servant pay scales. Second, health professional associations (especially for physicians) use their bargaining power to restrict labor supply and negotiate set wage rates. Third, the regulation of health services, such as licensing by professional bodies and governmental jurisdictions to ensure quality standards and monitoring, results in additional rigidities in the ability of workers to become employed wherever positions may be available.

# _Projecting demand_

The demand model builds on a previous economic model for projecting physician numbers (Scheffler et al., 2008). We apply a similar theoretical approach, but incorporate factors in addition to economic growth that are expected to influence demand for health workers, including the demographic structure and health coverage. We also use more recent and robust 4