Seeking Alpha
Profile| Send Message|
( followers)  

My last post finished with a question: Where are the new jobs going to come from?

A reader (Juanita de Talmas) commented that, after the dotcom and real estate bubbles failed to generate jobs in a sustainable fashion, healthcare is likely to implode next. I find this an intriguing subject and I will look more into it-- also taking into account that a devoted follower of this blog (Thai) is in healthcare and frequently provides valuable insights.

The original question is modified thus: Can healthcare provide the additional jobs needed for an economic recovery?

First, as always, some data in chart form.

  • Job creation in healthcare significantly outpaced overall employment for many years and is still going strong. In August, when overall non-farm payrolls were down -4.3% from last year, healthcare jobs grew by +2.3%.

Click to enlarge:

  • This divergence in job creation has been happening for many years. Today, more than one in ten working Americans is employed in the healthcare services field, up from one in thirteen fifteen years ago (* see note below the fold for healthcare manufacturing jobs).

Click to enlarge:

  • It's no secret why this is so: spending on medical care has exploded in the last 25 years, and now accounts for a whopping 20% of personal consumption expenditures and 14% of GDP.

Click to enlarge:

  • The United States spends far more on health than any other nation in the world. According to the World Bank, it spends 15.4% of GDP when Switzerland spends 11.5%, Canada 9.8% and - surprise, surprise - Sweden 9.1% and Denmark 8.6%, both presumed "nanny states".

Click to enlarge:

Data: World Bank
  • But what are we getting in return, what is the bang for our buck? Pretty terrible, I'm afraid. As an example, take infant mortality (deaths of infants under one year old per 1,000 live births) and multiply by the above spending as a percentage of GDP. The result is the chart below - and by this measure alone we are a sad laggard in healthcare efficiency.

Click to enlarge:

Data: World Bank

The answer to the jobs question becomes pretty straightforward, therefore: No, healthcare cannot generate many millions of new jobs because it is already overstretched and inefficient, most likely crowding out other essential spending, e.g. investment on energy and transportation infrastructure.

Are there any signs that the consumption of scarce economic resources for healthcare services will stop growing unchecked? Well, of course: Obama's healthcare reform plans are, by design, geared towards avoiding the wholesale collapse of American household finances, particularly since the baby boom generation is "greying" fast. Despite cries of "where are we going to get the money?" the ultimate objective, I believe, is to spend less overall, not more.

_________________________________________________________________
*This total does not include related fields in manufacturing, such as pharmaceuticals and medical equipment makers (a combined 586,000 jobs in July). There is an interesting fact: such healthcare manufacturing jobs have not been growing at anywhere near the pace of healthcare services jobs. In fact, those two sectors combined now employ 2.7% fewer workers than last year. No manufacturing sector is immune from relentless Chinese outsourcing, even much vaunted healthcare.

Source: Why Healthcare Probably Won't Generate Jobs for a Recovery