Healthcare Can Get America Working

With official unemployment in the US hovering around 10 per cent, and actual levels much higher when the underemployed and discouraged are counted, the most urgent priority is job creation. But efforts to get America working again must be informed by the striking fact that most employment growth in the past decade has been concentrated in three sectors: healthcare, education and government, mostly state and local public services.

The rise of the health/ed/gov super-sector flies in the face of two popular predictions about "the jobs of the future". In the 1990s, advocates of the new economy argued that we would increasingly depend on what Robert Reich, the former labour secretary, called "symbolic analyst" jobs. But the vision of a nation of techies was oversold. Silicon Valley and its silicon siblings have transferred not only manufacturing but also design to countries with lower wages and more government subsidies to business. The technology jobs that are expected to grow most rapidly are those of office tech specialists--who in effect are clerical staff. A world-class technology sector will transform the economy and generate tax revenue but will create relatively few jobs.

Many on the left have high hopes of "green-collar jobs". But green jobs, on closer inspection, mostly turn out to be manufacturing jobs that can be offshored or low-wage, low-skill construction jobs. To make matters worse, even with huge federal, state and local subsidies, solar and wind power combined provide little more than 1 per cent of US electricity consumption. The prospects for the expansion of renewable energy without vastly greater subsidies and taxes on fossil fuels are not encouraging.

For the real jobs of the future, look to healthcare, education and local public services--particularly healthcare. According to the Bureau of Labor Statistics, healthcare accounts for seven out of the 20 fastest-growing occupations, more than any other category. Home health aides and personal and home-care aides are found both among the fastest-growing job categories and among the occupations with the largest overall job openings in the years ahead.

While employment in manufacturing is declining overall, employment in pharmaceutical and medicine manufacturing in the US is expected to expand. Better yet, the growing healthcare sector is creating jobs for workers at all educational levels, from the highest--physicians and surgeons who need professional degrees--to the lowest--health aides who need only high school qualifications plus brief on-the-job training. The medical-industrial complex is unique among industries in combining the potential for greater research and development, more manufacturing and a growing number of labour-intensive jobs that cannot be offshored.

What is driving this growth? The US healthcare industry is plagued by inefficiency and rent-seeking by private insurers, pharmaceutical companies, hospitals, physicians and lawyers. But even when costs are brought into line with those of other countries, the US healthcare system is likely to increase its share of the economy. One reason is the ageing of the population. Another is the fact that societies, like individuals, choose to purchase more healthcare as they grow more affluent. Health is a good that makes possible all other goods.

Far from being a problem, then, the steady and sustainable growth of employment in the healthcare sector, along with jobs providing care for the elderly and children, education and the provision of public goods, may be the next stage in the evolution of advanced economies. As technology made possible greater production with fewer workers, first agriculture and then manufacturing shed labour to other sectors. Today information technology, by eliminating much routine office work, is shifting labour into "proximity" services such as healthcare that cannot be offshored and cannot be automated. A high-tech economy leads to more "high-touch" jobs that only human beings can perform.

Healthcare, like education, is heavily subsidised by government when it is not provided by the public sector. Must its growth mean more public sector at the expense of the private? It makes more sense to think of the economy as a mosaic of sectors, most of which, like healthcare, are partly private and partly public. The proper question is whether healthcare, be it public, private or mixed, could crowd out other important sectors. We would not want its growth to damage investment and employment in manufacturing, agriculture, energy and infrastructure. Fortunately, at least in the US, employment can expand in all these areas as well as healthcare at the expense of the low-productivity fast food and recreation industries, with benefits for the quantity of production as well as the quality of life.

Will the health aide be the typical worker of the 21st century, as the factory worker was the iconic figure of the 20th? A future in which the dominant sector is healthcare might come as a disappointment to prophets of a high-tech new economy or a green-collar utopia. But it would not have surprised the German poet Johann Wolfgang von Goethe. In 1787 he sardonically commented: "Speaking for myself, I too believe that humanity will win in the long run; I am only afraid that at the same time the world will have turned into one huge hospital where everyone is everybody else's humane nurse."