Health Workers May Experience Costly Dislocation As Health Spending Growth Slows

May 04, 1998

For decades, Americans have been worried about the impact of escalating health costs and working to keep expenses down. The proportion of our Gross Domestic Product (GDP) devoted to health services, once expected to soar to one-fifth or even higher by the end of this century, has now held steady at 13.6% for four years in a row. As recently as 1995, the Health Care Financing Administration predicted that health expenditures would reach 17.9% of GDP by the year 2005. In fact, the 1996 rate of growth was lower than the most optimistic "slow-growth" projections used by the Bureau of Labor Statistics and the Department of Commerce in their forecasting models.

An article appearing in the May/June 1998 issue of Public Health Reports analyses the effect this slowed rate of growth will have on health workers and local economies. "The mix and location of jobs must shift," says author Christine E. Bishop, PhD, of the Institute for Health Policy at Brandeis University, "with some workers and some regions bearing disproportionate transition costs."

The health services sector is a major employer. Excluding government employees, over 9.5 million workers--almost one in ten private sector employees in the United States--work to produce health services. Between 1988 and 1996, private health sector employment grew at a 3.7% average annual rate, substantially faster than the 1.6% annual growth in jobs in the private non-farm economy as a whole. But the latest available employment statistics show that total non-government health jobs grew only 2.2% between 1995 and 1996, slightly slower than total jobs for the private non-farm economy, which grew 2.6%.

The mix of jobs will need to change, consistent with shifts in spending within the health sector. Bishop finds that "there currently is decreased growth in hospital jobs--both government and non-government--and strong job growth in ambulatory and home health care." In addition, pay for health workers is not increasing as rapidly as in the past, a further signal of slackening demand. Job composition is in part responsible for this effect: employment shifts within the health sector have been toward lower-paying sub-sectors and jobs such as home health services.

The impact of health spending cuts on individual state and local economies depends on the portion of health service spending that flows into states and localities from outside. States heavily dependent on outside funds, such as insurance and pharmaceuticals, include Indiana, Connecticut, New Jersey, and Minnesota. Declines in health employment will also be strongly felt in areas where the smaller scale of non-health employment makes health services a dominant employer, such as West Virginia and North Dakota. In areas like the Mountain and Pacific regions, which have especially lean health services systems, it is possible and even likely that they will maintain their health employment levels through any spending slowdown. States with larger capacity and above-average health spending per capita may actually lose jobs.

But even with the slowdown in health job growth, health sector jobs are still projected to grow at an annual rate of 1.6% from 1990 through 2005, more rapidly than is projected for total jobs in the economy. According to these Bureau of Labor Statistics (BLS) projections, a full 2.6 million jobs will be added in the health sector between 1990 and 2005 and growth in other sectors would also occur due to continued demand. Bishop concludes that "the nation's need for a more efficient and effective health sector cannot be held hostage to concerns about the redistribution of employment."

CONTACT: Christine Bishop, PhD, Institute for Health Policy, Brandeis University, Waltham MA; tel. 781-736-3942; fax 781-736-3905; e-mail bishop@binah.cc.brandeis.edu.

Inner City and Low-Skilled Jobs at Risk: Prepare for the Future

In a related commentary, Rashi Fein, PhD, of Harvard Medical School, writes that a slowdown in health spending should reflect three important considerations: 1. Costs should be shifted to eliminate waste and inefficiency, not reduce the quality of care. 2. Cost reductions must be real, not just shifted from one pocket to another. 3. Cost containment should not reduce access or care to the un- and under-insured.

Fein also points out that the reduction in health spending moves monies that were once spent in the "quasi-public" sector into the private sector--without discussion or debate as to how best to spend these newly available resources. "It would be helpful and responsible to create mechanisms that would help assure adequate discussion" says Fein.

Affected communities need to plan ahead for downsizing, involving elected officials, community representatives, and the interested parties in the planning process. In the past, health sector growth has provided abundant new jobs for relatively unskilled workers, especially important for minority women. If that income declines and there is no apparent substitute, major portions of our cities will be extremely hard hit. Fein reminds us that we will make less beneficial progress if those who feel their jobs threatened worked to block change. "It is in our self-interest to reduce those frictions. We need to prepare for tomorrow."

CONTACT: Rashi Fein, PhD, Department of Social Medicine, Harvard Medical School; tel. 617-432-2112; fax 617-432-2565; e-mail rfein@warren.harvard.edu.
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