US Health Care and Future Job Growth

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The health care sector has been an important generator of U.S. jobs in recent years, even managing to escape the severe layoffs that hit other sectors during the Great Recession. Health care is expected to continue to expand employment in coming years, but the jobs will shift to low-paying support occupations, according to a recent article in the Regional Economist.

Charles S. Gascon, a regional economist at the St. Louis Fed, looked at industries that provide health care services, such as doctor’s offices, hospitals and nursing homes. About 12 percent of the U.S. workforce is employed in these industries. A broader definition of the health care sector would also include industries such as drug manufacturers, pharmacies and insurance companies, which would bring the sector’s share of U.S. workforce to 14 percent. Due to data availability, however, the article focused on the narrower definition.

The health care sector is more labor intensive than other sectors, such as manufacturing, and this translates into a relatively lower share of U.S. output. Health care accounts for 7 percent of output, much smaller than its 12 percent share of U.S. workforce, according to the author.

However, household consumption of health care services has grown steadily in the past 40 years as prices increase. Health care represents about 22 percent of all household spending, up from 10 percent in the early 1970s.

The health care sector also has had an outsize impact on U.S. employment growth. From January 2007 through November 2017, the health care sector added just over 3 million jobs, which represented about 32 percent of all new U.S. jobs.

This “is impressive considering the sector employed only 9 percent of the workforce in 2007,” Gascon wrote. Most of these new jobs were in the ambulatory care service industry, which includes doctor’s offices, dentist offices and outpatient centers, he added.

Working in the health care sector doesn’t necessarily mean that one is employed in a health care occupation, Gascon noted. About 40 percent of the sector’s workers are not directly involved in treating a patient; instead, they work in jobs such as office or administrative work and food preparation.

The remaining 60 percent work in two broad occupational groups:

• Health care practitioners and technical occupations, which include physicians, pharmacists and registered nurses
• Health care support occupations, which include nursing assistants, home health aides and medical assistants

Those employed in health care practitioners and technical occupations account for about 5.9 percent of the U.S. workforce, with nurses accounting for the largest occupation within this group. Health care support occupations, meanwhile, represent about 2.9 percent of the U.S. workforce.

The groups’ wages differ greatly. In 2016, those in the practitioners group earned an average hourly wage of about $38, which is 60 percent more than the average hourly wage for all private sector employees. For the service group, the average hourly wage was about $15, or almost 40 percent less than the wage for all private sector employees.

In past years, the high-paying practitioner group posted the faster job growth. From 2006 to 2016, the number of practitioner jobs grew 21 percent, while the number of service jobs rose 15 percent, the author wrote.

However, the outlook is changing.

“What begins to appear, based on past trends and BLS [Bureau of Labor Statistics] projections, is a gradual shift in the health care sector toward more low-pay support positions,” Gascon wrote.

The BLS projects that three health care support occupations will be among the top five fastest-growing occupations over the 10-year period ending in 2026:

• Home health aides
• Personal care aides
• Physician assistants

“Projected employment growth in these occupations is between 37 and 47 percent,” he wrote. “‘Nurse practitioners’ is the only practitioner group in the top 10, with a projected growth rate of 36 percent.”

The overall demographic trends will continue to spur strong growth in the health care sector, and the sector also is less sensitive to business cycle fluctuations, Gascon noted.

“However, growth in health care does not guarantee broad-based prosperity,” he concluded. “Beyond the high pay of health care practitioners, the health care jobs in highest demand pay lower-than-average wages.”

¹ A broader definition of the health care sector would also include industries such as drug manufacturers, pharmacies and insurance companies, which would bring the sector’s share of U.S. workforce to 14 percent. Due to data availability, however, the article focused on the narrower definition.

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