Why Healthcare Probably Won't Generate Jobs for a Recovery

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%.

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• 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.

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• 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.

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*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.

Comments

[Vienna:]

Yes, very nice article. And again I would like to repeat what I just carry on repeating, since I have worked in the US automotive industry.

You are not as prodcutive as you always like to present yourselfy, and you never listen to anything that anybody tells you - the US as general.

I am always being told that Airbus will never do fine, European cars are to small, the Euro is crap, the terrorists are going to casue harm to the US and european healthcare can never compete with the US.

Not to forget all the theories about how the bad communists in China can never compete with the US.

Look at your own charts and then think again.

Sep 08 08:17 AM

[buoy:]

Boomers will create a huge demand for healthcare just as they have created a huge demand in every other institution they have passed through.

Sep 08 09:11 AM

[ctjaeger:]

Not if ObamaCare is enacted, at least in theory. While I disagree with the author on a number of points, I do agree that it is the theoretical objective to spend less on healthcare, not more.

Will jobs come from healthcare? According to various speechs by the Administration and Congress, they are looking to add a number of healthcare professionals to the system (physicians, nurses, nurse practioners, etc.). If this is true and we will be spending less on healthcare, the only conclusion is that these will not be jobs that would traditionally be considered "well paying".

There is without a doubt a new paradigm coming with respect to how care is rationed. Currently, it is rationed financially, however, that isn't "fair" and so rationing will become more democratic in nature. The basic way to reduce costs will be to reduce demand/use, thus Comparative Effectiveness will become part of our lexicon in the effort to reduce costs. I'm not saying "Death Panels", just that certain treatments will not be available necessarily as making everything covered is simply not economically feasible.

I don't see significant new jobs being created through Healthcare Reform. The proposals on record will not improve accessibility to care in underserved areas. Giving everyone health insurance is almost guaranteed to drive up the cost of care.


On Sep 08 09:11 AM buoy wrote:

> Boomers will create a huge demand for healthcare just as they have
> created a huge demand in every other institution they have passed
> through.

Sep 08 09:43 AM

[John Galt:]

Will health care reform create jobs? Well, not if you take away the profit motive.

Does our health care cost more? Sure, but we have an aging boomer population, the fattest people on earth, and access to the best medical technology without lines. Yeah, we get better/faster service, and you pay for it.

I had a friend that was all for a socialist health care system. I said which would you rather have...

System A) Everybody gets the same health care, but when you need coverage/an operation, you take a number and wait in line regardless. It might be hours, days or months, but you wait in line regardless of your financial status, need or anything else.

System B) If you are willing to pay more money, you get seen first. If Bill Gates is willing to pay more money, he get's the doctors services before the homeless guy.

Now my friend that was for "universal health care" said she liked System B better and it blew my mind.

Sep 08 10:03 AM

[Michael Clark:]

Our current health-care system is a HUGE burden on American business. Transferring that burden away from business (and reducing costs significantly, that is the key) might spur businesses to hire more workers. MIGHT is the key word. Businesses have been busy hiring more Chinese, Mexican and Indian workers than Americans for the last 15 years, so there's no guarantee that American Business has any loyalty to American workers.

Sep 08 10:17 AM

[Michael Clark:]

Another interesting chart might be % of bankruptcies worldwide caused by medical emergencies.

Sep 08 10:21 AM

[Sober Realist:]

I think the author has put his finger on the problem of healthcare in this country: less bang for the buck. If anybody thinks we have better healthcare in this country compared to other nations, read this:
By T.R. Reid -- Five Myths About Health Care
www.washingtonpost.com...
Hospital fees now 400 (to 800) times the cost in 1934
www.mountvernonnews.co...

And also see this movie:
www.moneydrivenmedicin.../

The United States is the only developed nation that does not have a comprehensive national health care plan for all its citizens. And the middle class is paying the price for this, all for the crime of getting sick.
Unfortunately, the for profit insurance companies have already won. See here:
The Health Insurers Have Already Won
How UnitedHealth and rival carriers, maneuvering behind the scenes in Washington, shaped health-care reform for their own benefit
August 6, 2009
www.businessweek.com/m...
Why Are The Drug and Health Insurance Companies Smiling? August 21, 2009
www.americanchronicle....

And here for my personal take on the situation:
www.chrismartenson.com...

Sep 08 11:40 AM

[Pat C:]

Good balanced article - thanks.

Sep 08 07:07 PM

[Vienna:]

So why does this blow your mind, people in the states have their own prejudice against anything else, and will not want to understand other points of view.

This is how the god dam whole system works in europe. General medical aid for everybody, based on effectiveness, and a high quality based medical insurance for everybody that prefers it.

Is this so damm hard to understand. The only thing I keep on reading is how people praise the US system, and keep on explaining how other systems can not work, when they not not understand the systems, and their own system is ineffective and crashing.

And dont tell me that you dont need to wait for 2-3 hours when you go to hospital or the doctor. Been to the states and been waiting.



On Sep 08 10:03 AM John Galt wrote:

> Will health care reform create jobs? Well, not if you take away the
> profit motive.
>
> Does our health care cost more? Sure, but we have an aging boomer
> population, the fattest people on earth, and access to the best medical
> technology without lines. Yeah, we get better/faster service, and
> you pay for it.
>
> I had a friend that was all for a socialist health care system. I
> said which would you rather have...
>
> System A) Everybody gets the same health care, but when you need
> coverage/an operation, you take a number and wait in line regardless.
> It might be hours, days or months, but you wait in line regardless
> of your financial status, need or anything else.
>
> System B) If you are willing to pay more money, you get seen first.
> If Bill Gates is willing to pay more money, he get's the doctors
> services before the homeless guy.
>
> Now my friend that was for "universal health care" said she liked
> System B better and it blew my mind.

Sep 09 04:29 AM

[joachimdippold:]

Hi Folks,

some informative documentary on the US health system: Sicko, by Michael Moore.

How much has changed since 2007? Just curious.

Enjoy your evening!
Joachim

Oct 27 04:52 PM