Oct 25, 2017

Cost-cutting could stunt the health care jobs expansion

Health care and education — caring for the rapidly aging U.S. population and educating the young — will account for almost half the new employment created over the next decade. But according to one economist, this projected jobs expansion may fall short as it runs into efforts to contain taxes and medical costs, especially in regions that voted overwhelmingly for Donald Trump.

Data: Bureau of Labor Statistics; Chart: Chris Canipe / Axios
Data: Bureau of Labor Statistics; Chart: Chris Canipe / Axios

Why it matters: In its new 10-year projections of job growth, the U.S. Bureau of Labor Statistics said middle-class employment will continue to shrink as a share of the total pool, suggesting deepening inequality and political polarization, analysts say. Instead, employment gains will be fastest in the highest- and lowest-paying occupations. And health care and education — which have by far the largest jump in the projections — may be less a lifeboat than many economists think.

What the BLS is reporting: The top line is that the hollowing out of the middle of the job market — the leading dynamic in the deep economic dissatisfaction across the manufacturing and rust belts — is likely to continue over the next decade. Jed Kolko, chief economist with Indeed.com, writes that the slowest job growth will be in metro areas in the south and midwest, places where Trump outperformed in 2016 on his promises of economic revitalization. "In places that voted for President Trump by a 20-point margin, 16% of workers are in occupations projected to shrink, versus 13.2% of workers in places that voted for Hillary Clinton by a similar margin," Kolko said.

Doubts about the good news: No one can predict with certainty where new jobs will be created. The best guess by mainstream economists — based on demographics — is in eldercare and education. But Michael Mandel, an economist with the Progressive Policy Institute, says that size of expansion is unsustainable. "These jobs are not for free," he tells Axios. "We're paying for them through taxes, and we're paying for them with higher prices." According to Mandel, healthcare and education employment growth is masking an even worse outlook for these regions.

  • In the heartland states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri and Nebraska between 2000 and 2016, the number of jobs in healthcare and home assistance rose by 11%, even as the age-adjusted population rose by just 4.9%
  • If you take away these jobs, these states lost 1.1 million jobs, while the rest of the country gained more than 3 million jobs.

Why healthcare jobs can't grow forever: Mandel warns that the BLS often fails to predict economic changes that lead to new jobs trends. For instance, the Bureau grossly underestimated growth in the warehousing and e-commerce sector the past two years. "The rapid expansion of the private-sector healthcare and education workforces is the major reason healthcare and education costs are rising so quickly," he writes in a recent report. "Getting the cost of healthcare under control will necessarily involve slowing the rate of healthcare hiring."

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