What's Really Propping Up The Economy?
BusinessWeek asks the million dollar question: "What's Really Propping Up The Economy?"
Their answer -- not housing, technology, or finance -- is health care:
"If you really want to understand what makes the U.S. economy tick these days, don't go to Silicon Valley, Wall Street, or Washington. Just take a short trip to your local hospital. Park where you don't block the ambulances, and watch the unending flow of
doctors, nurses, technicians, and support personnel. You'll have a front-row seat at the health-care economy.
Without it the nation's labor market would be in a deep coma. Since 2001, 1.7 million new jobs have been added in the health-care sector, which includes related industries such as pharmaceuticals and health insurance. Meanwhile, the number of private-sector jobs outside of health care is no higher than it was five years ago.
Sure, housing has been a bonanza for homebuilders, real estate agents, and mortgage brokers. Together they have added more than 900,000 jobs since 2001. But the pressures of globalization and new technology have wreaked havoc on the rest of the labor market: Factories are still closing, retailers are shrinking, and the finance and insurance sector, outside of real estate lending and health insurers, has generated few additional jobs."
Quite a picture:
The biggest surprise in the column was that Tech hasn't created all that much in temrs of new jobs:
"Perhaps most surprising, information technology, the great electronic promise of the 1990s, has turned into one of the biggest job-growth disappointments of all time. Despite the splashy success of companies such as Google (GOOG ) and Yahoo! (YHOO ), businesses at the core of the information economy -- software, semiconductors, telecom, and the whole gamut of Web companies -- have lost more than 1.1 million jobs in the past five years. Those businesses employ fewer Americans today than they did in 1998, when the Internet frenzy kicked into high gear."
Fascinating stuff . . . worth checking out the full article.
>
Source:
What's Really Propping Up The Economy
Michael Mandel, Joseph Weber
Business Week, SEPTEMBER 25, 2006 http://www.businessweek.com/magazine/content/06_39/b4002001.htm
Saturday, September 16, 2006 | 12:16 PM | Permalink
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Despite the upswing in Information Technology jobs discussed yesterday, this industry is only trying to recoup the losses of nearly 1.1 million jobs in the last five years. The future of the tech industry is looking brighter, but it has hardly fulfill... [Read More]
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Comments
I find this really worrisome.
It seems like all the job creation in the past few years has been in fields that are not related to long-term wealth production.
In fact, it seems like we're outsourcing production and wealth-accumulation while in-sourcing consumption and debt-accumulation.
Posted by: ac | Sep 16, 2006 12:31:42 PM
I do not find this datum -- alone -- worrisome. In the abstract, we could be using our productivity gains in amenable sectors to shift employment to those areas, like health care and construction, where no amount of technology or clever management will remove the verities of nursing or carpentry.
Were the employment/population ratio a percent or three higher, I wouldn't worry about this at all. As it is, I think worrying about healthcare misspecifies the real problems of a tepid job market.
Posted by: wcw | Sep 16, 2006 12:52:23 PM
As societies become more affluent they can increase the share of GDP spent on healthcare.
Posted by: Zephyr | Sep 16, 2006 1:04:54 PM
From TickerSense:
One of the first guys to predict $70 oil now says $15 oil is not unthinkable, at least temporarily.
http://seattletimes.nwsource.com/html/businesstechnology/2003257679_oilconsumers14.html
Posted by: S | Sep 16, 2006 1:34:46 PM
As societies become more affluent they can increase the share of GDP spent on healthcare.
True. But those same societies have to continue to produce new wealth via some sort of 'tradeable' or the affluence dries up & the trend reverses.
You know... the 'Rise and Fall of Empire' type thing.
What the article suggests is we had better find a new engine to drive prosperity & affluence or we will be going in reverse.
Posted by: dryfly | Sep 16, 2006 1:40:16 PM
Also, remember that most health care is 'consumption'... meaning we consume resources to give us outcomes but it results in little we can later trade for future resources.
There are exceptions - using health care to produce healthy workers who can work better & longer into life - but mostly we work hard (as a society) to be able to provide health care as a quality of life issue, not to be able to produce more tradeables to make us richer.
We need to find something 'productive' that will support our health care Jones or we'll have to go cold turkey eventually.
Posted by: dryfly | Sep 16, 2006 1:47:57 PM
Agree dryfly - I would equate resources poured into healthcare with resources poured into govt, defense spending. etc. which studies have shown do not produce much of an economic return and are in fact a drain on the economy.
It's wrongheaded to believe that the high % of GDP we spend on healthcare is a luxury afforded by our relative affluence - what it reflects is the incredible inefficiency in our health care "system" (anything but) which we pay a heavy economic price for.
Last time I checked, we devote about 14-15% of GDP to health care vs. 11% or less in other industrialized economies. That can't be a good thing...
Posted by: drey | Sep 16, 2006 2:18:49 PM
Healthcare really create wealth.
Statistically, half of the cost of healthcare are expended in the last year before the death.
So, if people live 70 years, and then them live 71 years, they postpone of one year to expend the 50% of their health costs.
(I.E.)
So from 0 to 69 they use 50$ , the fromt 69 tto 70 they use the last 50$.
If you delay to spend 50$ for a year, you will be able to invest them and reap a profit, then a year after you cold have 51$ (2% profit).
Better health let people to work more, more longer and stronger. What make westers more productive is that they are more healthy (in mind and body) than other populations, so we are able to work more, live more, amass more whealt and so on.
Posted by: Mirco | Sep 16, 2006 2:20:16 PM
As societies become more affluent they can increase the share of GDP spent on healthcare.
True, but if those societies do not produce more than the consume, they will not remain affluent.
Posted by: ac | Sep 16, 2006 2:20:27 PM
Unfortuantely....the war is what is proping most of all of this!
Posted by: New Condos | Sep 16, 2006 2:32:30 PM
«"As societies become more affluent they can increase the share of GDP spent on healthcare." True, but if those societies do not produce more than the consume, they will not remain affluent.»
The solution most G7 governments have chosen to this problem has two aspects:
* Drive house prices as high as possible.
* Encourage as many young immigrants as possible to come and work for low wages and to buy expensive houses.
Posted by: Blissex | Sep 16, 2006 3:17:33 PM
Based on the volume of newspaper advertising for condos in the Seattle area, which appears to be about 500% of what it has been the past few years, I'm gonna take a wild stab that newspapers could be doing fairly well for the last six months or so...
Posted by: Bob A | Sep 16, 2006 3:37:58 PM
I once was considering my options on where to retire. Costa Rica was one country I looked at. I was amazed to find out that the life expectancy there was virtually the same as the US but they spend about 1/10 of what US citizens do on health care.
http://www.who.int/countries/usa/en/
http://www.who.int/countries/cri/en/
Now one could argue that for that extra health care spending Americans enjoy a higher quality of life rather than a longer life and this does come through in the statistics that measure heathy life expectancy which is about 2yrs longer in the US than in Costa Rica.
So after spending $5k more per year for 77yrs or $385k
the american gets 2 more years of non-disabled life.
As a perspective.. if an american receives $1200/mo for 15 yrs in social security. ( i have no idea if this is average or not) he will receive $216K.
Instead of spending this on the current health care system he could potentially receive almost 3 times as much social security ( $600K). Of course he/she could still spend any amount of this on health care if so desired.
Of course this is just an Einsteinian thought experiment and has no real basis in any future reality .. ie don't expect the current health care economic beneficiaries to give up the current system without a herculean fight.
Posted by: mrmanny | Sep 16, 2006 3:43:09 PM
The health care spending is from money borrowed from foreigners just like everything else.
Posted by: Brian | Sep 16, 2006 7:07:12 PM
Seems like a poorly titled graphic, since jobs are not sole component measuring the state of an economy. It should have been, "What's propping up the job market?" But that doesn't sound as sensational.
Posted by: royce | Sep 16, 2006 8:11:04 PM
health care is a cost to the economy..as for some one living longer , one could say that life beyond 70 is also largely unproductive..with millions of 70+ americans - and increasing rapidly afterwards- bodes ill. Heck, the whole SS and medicare thingy would resolve itself if people on avg die earlier...In fact if most survive to 100, conditions will be very dire...
Posted by: andiron | Sep 16, 2006 9:22:45 PM
...heathy life expectancy which is about 2yrs longer in the US than in Costa Rica.
So after spending $5k more per year for 77yrs or $385k
the american gets 2 more years of non-disabled life.
Yes, but that extra spending on health car enables Americans to eat cheese covered donuts and bacon every morning, with the same life expectance. So in the end it's worth it.
Posted by: ac | Sep 16, 2006 11:36:38 PM
make sure that you see the graph
"the health belt"
http://www.businessweek.com/magazine/content/06_39/b4002005.htm
is as good as the map of misery
http://www.immobilienblasen.blogspot.com/
Posted by: jmf | Sep 17, 2006 8:32:21 AM
I have seen some numbers talking about demographics and the need for physical therapists and health care related workers and if they hold true the demand will essentially be unfillable.
Of course these are not high-level jobs but since they are based on demographic trends they should be true for more senior jobs like doctors, administrators and hospital architects.
Some of the posters above are right to point out that a good healtchare system is a national asset however our system still has pretty big holes vis a vis coverage and cost.
Posted by: Kris | Sep 17, 2006 8:40:28 AM
Health care is one of the industries that is expected to keep growing in the next 20 years. We are all getting older, and as the baby boomer generation reaches retirement age, the law of large numbers will tell you that, as they age, they will need more access to health care as their bodies break down from old age. There will be more cancers, broken bones and diseases that will afflict them. Ergo, there will be a need for more health care workers, home health aides and jobs related to the health care industry.
As far as technology, how much more innovation can be squeezed out of the market? There does not seem to be a lot of improvements left to be had in the speed of processors (at least not from what I can see here in the middle of the country) and a lot of the software development is coming from cheaper labor in India.
Are there any industries out there that show any promise of a breakout in the next few years?
Posted by: OkieLawyer | Sep 17, 2006 8:59:25 AM
Healthcare costs will continue to rise due to (1) aging of the population and (2) rise in obesity. The former is uncontrollable, the latter is controllable and further exacerbated by age. The statistics are astounding for chronic diseases (diabetes, asthma, COPD, CAD, hypertension and hyperlipidemia to name the big ones) for (1) the increase in both the prevalence (how many currently "have" it) and incidence (how many will "get" it) and (2) the increase in costs associated with treating the diseases. Everyone wants a magic pill, when the very simple (I first wrote easy, for we all know that it is not) solution for many of these diseases are adequate exercise and proper nutrition. The problem is, that all of us pay for the poor choices that people make regarding their health. I would say that this healthcare crisis is no different than the energy crisis....people fail to take responsibility for their choices, but rather see the magic bullet (or pill if you will).
Posted by: Leisa | Sep 17, 2006 9:41:37 AM
Does this article take into consideration all the self employed, and small business creation?
Posted by: JGarcia | Sep 17, 2006 12:34:33 PM
Leisa: I would comment, but my comment gets rejected as spam, presumably because of keywords.
Posted by: cm | Sep 17, 2006 4:10:15 PM
Leisa: Second attempt. In good part poor choices are enabled by doctors pushing pills. I heard to stories from a coworker:
(1) In a talk a dietician recommended certain medication for an obesity-related condition. When somebody from the audience suggested exercise and moderation, the lecturer acknowledged the effectiveness, but said "but you are never going to do it, so you will have to take the pill, and I won't recommend things to you that would work but you won't/can't do", or something to that effect.
Posted by: cm | Sep 17, 2006 4:16:05 PM
(2) When said coworker achieved a marked improvement in cholesterol with a die-et/exercise regime, her doctor (unrelated person) did not believe this and insisted she took medications without telling.
This indicates aside from possible individual incompetence or "incentives" that there is a general mindset of favoring pills over "lifestyle repair", and indeed using pills to enable/maintain unhealthy lifestyles.
Posted by: cm | Sep 17, 2006 4:17:05 PM
