The Health Care Employment Bubble
The Great Recession took down the US economy, but its effect was mild in the medical industry. Health care jobs continued to expand through 2009 and 2010 faster than almost any sector. Some of the most resilient cities in the country -- from San Antonio to Poughkeepsie -- stayed afloat on the stable currents of health spending.
This isn't a new trend: in the 2000s, the health and education sectors added more than 5.2 million jobs while the private sector grew by barely a million. It's not a dying trend either. In the next decade, the Bureau of Labor Statistics and the White House expect health care jobs to grow nearly twice as fast as any other category. Six of the top eight jobs with the fastest projected growth are in the health care or medical science industries. Three of the top five jobs with the largest projected growth are in health care.
With unemployment stuck at 10 percent, you'd have to think any sector adding jobs at a rapid and consistent pace is a sector worth celebrating. But it's also worth thinking about how sustainable the health care employment boom is.
Economist Michael Mandel tells a story in two charts. The first looks at health care employment vs. population growth in the decade before the Great Recession. What strikes Mandel is that healthcare jobs are growing much faster than the entire population, or even the senior population. Why does that matter? Because the purpose of health care should be longer lives. The fact that we're adding health care jobs faster than we're adding to senior citizen lives suggests to Mandel that we're not seeing the fruits of all this labor.
I don't know that healtcare output can be measured so easily. But if you buy Mandel's argument that higher labor costs aren't adding to output, then they can only add to costs...
He concludes: "The rapid increase in healthcare workers per capita is by itself a key reason for rising healthcare costs-separate from the cost of new drugs, the capital expense for new technology, and the aging of the population."
That's not all. Mandel then looks to the future, when the "godsend" that is healthcare jobs becomes "unsustainable." He projects healthcare jobs to double their share of the labor force in twenty years -- from about 11 percent today to 22 percent in 2030.
His second conclusion: "Over the long run, we're screwed unless we reduce the growth rate of healthcare employment down close to the growth rate of the older population."
Let's zoom out from health care to take a fuller look at the US employment picture. In the 1990s, an Internet boom and skyrocketing productivity fueled one of the great decades of growth in US history. In the 2000s, the new engine of the economy was the housing boom -- and all the financial services jobs, construction contracts, and over-consumption that went along with it. Today, we don't have one true engine. We have slow growth cross the services sectors, especially in health care. But we know -- or at least, Mandel makes a compelling case that -- the growth in health care employment has to slow down, and soon. Something has to take its place. But what?
THE NEXT ECONOMY
A series of articles about education and job creation trends that will impact the next decade.