How healthcare will remake the US economy

For years, the US labor market has undergone structural transformation. As manufacturing jobs slowly and steadily recede, the healthcare industry is more than replacing them.

This change has been particularly visible over the past year, during which healthcare has been responsible for about a third of all employment growth, while other categories such as retail and manufacturing remained inherently flat.

The national corps of nurses, oncologists, lab technicians, anesthesiologists and other health-related workers have grown steadily due to the post-recession recession, moving from 9% of the total workforce in 2000 to 13% today. The government hopes that this trend will continue as the country grows older and needs more care.

But if Congressional Republicans succeed in passing flagship tax and spending bills, that ferocious growth could cool. It is estimated that the Senate version will cut Medicaid, which accounts for about a sixth of the healthcare costs over the next decade. Approximately $82 billion comes from other healthcare funds, including Medicare and subsidies under the Affordable Care Act.

“It will put a strain on the ongoing operations of a considerable number of healthcare providers,” said Brad Hershbein, senior economist at the We Upjohn Employment Institute.

This is mostly true for clinics and hospitals that serve low-income areas. The Senate bill includes a $50 billion relief fund for rural hospitals, but it will not be distributed equally and does not completely offset Medicaid cuts. The law also challenges academic medical centres that have already been upset from the pullback of research grants. “Usually they're very resilient to different shocks, but this will be different,” Dr Hershbein said.

Just as politicians have long been idealized as a job that can support the comfortable lives of people without advanced degrees as much as they focus on factory work, healthcare now plays a role for more people.

This sector has seen much faster wage growth than non-health therapy. Unlike the wider economy, the increase in average pay moved particularly rapidly for the roles of intermediate skills such as nurses and physician assistants, but doctor salaries only increased to moderate proportions.

That's because the number of medical school slots remains limited, so state legislators are allowing people with less training to handle more features, such as diagnosing illnesses and prescribing medications.

“It's not like the economy is accepting, 'Oh, I don't think we have enough doctors,'” said Joshua Gottlieb, an economist at the University of Chicago, who recently co-authored a paper on the subject. “A new job has been born.”

Medical jobs are on the rise for three main reasons.

First, care is available to more people. The uninsured rate fell from 14% in 2000 to 8% in 2023. This has been largely reduced to the Affordable Care Act, which helped expand Medicaid to more people, subsidize private insurance and encouraged more employers to provide coverage.

Secondly, people with access to healthcare have used it more. Chronic diseases like kidney disease and cancer are becoming more common, but as America is getting older, more care is needed.

And thirdly, at least until the second half of the 20th century, Americans became more wealthy and consumed more health care as they didn't spend anything else. Globalization and mechanization make toasters and tomatoes much cheaper. However, knee surgery and nursing homes are still driven primarily by people who cannot be offshore or automated.

The rise of healthcare jobs also appears geographical. In 38 states, the industry is now the largest employer. Original manufacturing hubs like Cleveland and Pittsburgh have moved to healthcare as the core drivers of the local economy. Hospitals are also often the largest employers in small towns and rural locations, especially when drawing from the surrounding area.

While some policymakers emphasize the economic importance of manufacturing as they generate goods that can be exported to other countries, health services are also exported. Foreigners come to hospitals in the US for special procedures, foreign students study in US medical schools, and drugs undergoing US clinical trials are sold all over the world.

And the heavy weight of the workforce over healthcare is not unique. As countries become more prosperous, more employment infrastructure will shift into the health sector. The US tends to spend more on healthcare as its share of GDP, but nine economic cooperation and development agencies, including most of Northern Europe and Japan, have a greater share of the workforce in healthcare than the US.

Hiring healthcare professionals has been particularly quick in recent years as the pandemic has done so much. The provider left the bedside in large quantities, tired of the relentless time and dangerous situations. Healthcare employment has yet to keep up with its preschool trends, and job openings remain rising in other industries.

Nursing schools continue to kick out as many graduates as possible to keep up with the vacant seats.

“We really didn't have a year like, 'We're good, we have the nurses we need,'” said Robert Rossetter, chief communications officer at the American College of Nursing.

At the same time, new sources of demand are arising. Increased support for mental health through virtual counseling and employers and their insurance plans has created more work for therapists and counselors, both in individual practice and institutions such as schools and hospitals.

Jon Guidi is the CEO of Healthcare Recruiters International, and has staff on both temporary and permanent bases. He said the most severe deficiency was eased, except that it has something to do with behavioral health.

“In that area, wage escalation was very high,” Guidi said.

However, healthcare employment will continue to grow at the same pace. One reason is that it pushes the federal government to spend health.

The Senate version of the Republican massive tax and spending bill, along with other changes by the Trump administration, brings about 17 million fewer people with health insurance in 2034. People without health insurance tend to need more emergency care, as they cannot afford preventive visits, but it is not clear how those costs will be absorbed elsewhere. And these may not be the only cuts: the White House is also calling for cuts in federal funds for medical education and research that could limit the supply of newly trained workers.

Additionally, healthcare is becoming a little more efficient. Now many procedures can be performed on an outpatient basis. Recent advances in drugs such as diabetes medications, which are currently widely used for weight loss, appear to be likely to reduce the prevalence of chronic conditions associated with obesity.

And artificial intelligence could potentially reduce healthcare employment by around 20% as managers. Some of the tasks currently being borne by doctors, nurses and radiologists can be done more quickly with AI

Harvard Healthcare Economist David Cutler warns that the industry should not be seen as an employment program, although the future is necessary to provide care for more people, the industry should not be considered an employment program. Costs have risen for decades, putting an increasing burden on taxpayers and businesses. Whenever possible, these resources should be redirected to other parts of the economy.

“Anyone who is employed in healthcare doesn't have to hire in healthcare, that's a waste,” Dr. Cutler said. “It's healthcare money that spends people when they're sick, and that's someone who can work somewhere.”