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Tilting at Windmills

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September 19, 2006
By: Kevin Drum

THE HEALTHCARE BOOM REVISITED....Michael Mandel, who wrote the Business Week cover story I blogged about yesterday, has a blog of his own. That's sort of cool, no?

As you may recall, the takeaway from his story was that the American economy is being kept afloat by jobs in the healthcare industry. If you take those jobs away, private sector job growth elsewhere in the economy has been zero for the past five years. I objected that this was "statistical trickery" that could be done during any economic cycle, since if you remove the highest-growth industry you can make any economy look bad. Mandel emails to say that's not right:

This is a very unusual period where employment gains are so highly concentrated. Let's look at the previous business cycle, for example. Employment peaked in June 1990. Five years later, private sector employment had grown by 6.5 million.

The single biggest contributor to that growth was health services...but it only accounted for 25% of the private employment gains from 1990 to 1995.

....To put it a different way, private employment grew at a 1.4% annual rate from June 1990 to June 1995. Take out health services, and the annual growth rate of the rest of the private sector fell a bit, to 1.1%. Not that big a difference

Point taken. In the previous cycle, measured five years from the employment peak, the biggest industry (which was healthcare back then too) had contributed a lot of jobs, but not all the jobs. The non-healthcare economy really does look unusually anemic this time around.

On the other hand, it's also worth looking at a chart Mandel posted elsewhere on his blog. As you can see, it shows very healthy non-healthcare job growth for the past three years. There's no question that on an apples-to-apples basis (measuring from the employment peak for both the 1990 cycle and the 2001 cycle), overall job growth has been exceptionally weak this time around; and there's equally no question that healthcare has been the principal standout. On the other hand, since 2003 non-healthcare industries have accounted for about 80% of all new private sector jobs. I'm not sure this really makes the case that healthcare is the main industry keeping our economy afloat.

UPDATE: Mandel breaks down the past year into monthly chunks here. Healthcare's share of new job creation has averaged about 20% over the past three years, but it's grown to over 30% since the beginning of 2006. Is this a blip or a trend? We'll have to wait and see.

Kevin Drum 7:15 PM Permalink | Trackbacks | Comments (44)

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Comments

What is it with you guys and the Broken Windows Fallacy?

Do you not understand a fallacy when you see one?

Posted by: Al on September 19, 2006 at 7:25 PM | PERMALINK

Also, on this: The non-healthcare economy really does look unusually anemic this time around.

Because the data from which we take "usual" consists of exactly ONE data point. Awesome.

Posted by: Al on September 19, 2006 at 7:30 PM | PERMALINK

It means whatever economic growth we are managing in this country is almost all going towards maintaining our failing and extremely expensive healthcare system.

Under a different system, some of this money could be going elsewhere:

pay raises for workers
research and development (non health care related)
capital investment for equipment and productivity
education
etc.

But it's not. And if our healthcare system were the best in the world, then perhaps this would be worth it. But with all we spend, we still can't iron out the kinks in the system and deliver decent healthcare to all.

Time for a new plan.

Posted by: david on September 19, 2006 at 7:34 PM | PERMALINK

It looks like health jobs kept growing at a steady rate and probably had the same rate before the recession. It's the other jobs in the economy that took a hit and are now recovering. I'm with Kevin in that I'm not sure you can prove anything over this time period.

Posted by: Carl on September 19, 2006 at 7:35 PM | PERMALINK

I guess what Paul Craig Roberts has been saying for three years is right, the only kind of jobs we're creating are nontradable service jobs. Basically that means government, health care, construction.

I notice the term of art in Mandel's article is "private employment", a big chunk of job growth has been in the government sector (not just TSA workers and other civil servants, but jobs outsourced to contractors).

Posted by: beowulf on September 19, 2006 at 7:48 PM | PERMALINK

fake Thomas1 says:

all the good Christians will go to live eternally in a big cloud city in the sky.

I prefer climbing a beanstalk to the rapture.

Posted by: Disputo on September 19, 2006 at 8:02 PM | PERMALINK

Kevin Drum,

How come you never blog about the trade (current account) deficit? This says a lot about the shortage of jobs in tradeable sectors.

From Dean Baker of CEPR: The Deficit You Didn't Read About

Posted by: alex on September 19, 2006 at 8:06 PM | PERMALINK

the only kind of jobs we're creating are nontradable service jobs. Basically that means government, health care, construction.

You forgot porn.

Posted by: craigie on September 19, 2006 at 8:07 PM | PERMALINK

It looks like the most secure job in the US is probably a Registered Nurse. Probably has pretty good health insurance too.

Posted by: otto on September 19, 2006 at 8:07 PM | PERMALINK

And you only need a two year degree as entry to being a registered nurse.

Posted by: otto on September 19, 2006 at 8:09 PM | PERMALINK

You forgot porn.

Nah, that's all being outsourced to SE Asia and the FSU.

Posted by: Disputo on September 19, 2006 at 8:09 PM | PERMALINK

One of the things we should all keep in mind is that as the population ages, health care is going to remain a growth industry.

I am not sure we might not all benefit if more resources were freed up for other purposes. I know that in my own small business I have not been able to spend money on advertizing, invest new equipment or expand my staff as quickly as I would like because I have had to pay ever higher health care costs.

I would bet that the lack of any incentive in the health care industry to compete on the basis of either quality or especially cost has meant a transfer of assets to that industry at the expense of American productivity and job creation in other sectors.

Posted by: Ron Byers on September 19, 2006 at 9:25 PM | PERMALINK

David,

Sorry. You made the same argument first and better. Too bad nobody noticed. There seem to be few real people on line tonight.

Posted by: Ron Byers on September 19, 2006 at 9:30 PM | PERMALINK

Oh don't even get me started on ADN RN's - they are the reason we say RN stands for Royal Nitwit.

They scare the fuck out of me, and any time I am a patient (I have crappy knees) I refuse to let a 2-year nurse anywhere near me. If that badge does not say "R.N. BSN" get the fuck away from me.

It is absolutely wrong that an associates RN makes the same money starting as the nurse who got a real education and a bachelors degree.

Posted by: Global Citizen on September 19, 2006 at 9:48 PM | PERMALINK

Associate degree nurses (the ones who will be entering the field next year, and whom I teach cellular biology to are not an awe-inspiring lot. They take one 5-hour chemistry class that covers general, organic and biochem basics. They have to be drug through it kicking and screaming. They don't want to learn it.

They can't get their heads around the concept of molarity, but they leave school and set up IV's and titrate the flow of IV drugs that have potentially fatal side effects if they are not administered correctly.

I was doing a chart review one time on a nursing home patient, because the cultures kept coming back hot. The patient had an infection that was not responding to treatment. The only registered nurse on the unit was administering 20K unit doses of penicillin IV instead of 2 million unit doses. I tracked her down in the hall and asked her what the hell was she trying to do, scare a few elderly bacteria to death?

Posted by: Global Citizen on September 19, 2006 at 10:06 PM | PERMALINK

Well, has anyone hypothesized that job growth in other industries is so anemic simply BECAUSE the healthcare industry has grown so expensive and problematic. I know that if industries could reduce their healthcare premiums they could certainly hire more workers and make more capital investments.

Posted by: Augie on September 19, 2006 at 10:24 PM | PERMALINK

Augie brings to bear a valid point. Our manufacturing industries are having difficulty in the competitive arena because so much of their operating capital is sucked up by healthcare costs. What is the latest figure? If you buy a new GM automobile, healthcare costs to cover employees and retirees represent somewhere between $1500 and $2000 dollars of the sticker price. That makes it awfully difficult to compete with Toyota, Honda and Nissan, especially on lower priced economy vehicles.

Posted by: Global Citizen on September 19, 2006 at 10:35 PM | PERMALINK

I will also bet next weeks paycheck that ninety percent of you have a general practitioner who employs an "office nurse" who is not a nurse at all, but a medical assistant.

Posted by: Global Citizen on September 19, 2006 at 10:41 PM | PERMALINK

As the husband of an "Associate's Degree Nurse" I am not pleased to read some of the prior comments. Focusing only on the academic coursework is totally misleading. All nursing students, both in 2-year and 4-year programs, have to go through extensive clinical training, and that's where most of the crucial skills are acquired. In addition, newly hired nurses have to go through lengthy on-the-job training.

Posted by: Peter on September 19, 2006 at 10:45 PM | PERMALINK

Not mentioned in either healthcare blog entry is that in the 1990's, there was a stagnation in the healthcare growth. It was generally thought that too many doctors were being trained, and that there were too many hospital beds. During my training, CABG's went from a 14 day stay to 6-7. Cardiac caths use to be a 3 day stay- now they're done as outpatients. However, the powers that were significantly underestimated the US population, and they found out that that not everything could be treated as an outpatient. The result is that not enough doctor and nurses were trained in the US to meet the demands of a growing and aging population. There are thus alot more foreign trained doctors and nurses. The growth in medicine related jobs since 2001 may be in part compensatory for the contraction in the 90's.
Global Citizen, don't you know that only (American) doctor bashing is allowed here? All 700,000 of us are stupid, incompetent, lazy and greedy, but all other healthcare workers, and doctors who work outside the US, are not. BTW, WTF were they using pencillin in a nursing home patient? Virtually all bacteria in nursing homes became penicillin- resistant decades ago.

Posted by: gyp on September 19, 2006 at 10:50 PM | PERMALINK

Augie,

David made the same point, better right at the beginning of the thread. He got there firstest with the mostest.

I tried to make the same point, but wasn't as successful.

That is the discussion we should be having. Arguing about BSN or ADN nurses reminds me of my first wife, and the trials she went through.

She is now a surgical nurse at the local children's hospital having grown too old for work with the sexist and arrogant orthobasdards she worked for many years--guys based at global citizen's "favorite" hospital.

When our granddaughter was hurt it was nice having her on staff at the hospital.

You want to get somebody started just talk to her about child safety. I have actually watched as she walked across a street to scream at some dolt who was letting his 2 year old ride with him on his riding lawn mower. Something about helping a team attempt to reconnect the severed foot of a 3 year old will do that to you.

Posted by: Ron Byers on September 19, 2006 at 11:08 PM | PERMALINK

Gyp: That incident was quite a few years ago, and I did question the use of pcn in that patient and that environment. I do not recall that I ever got a satisfactory answer, now that I think about it.

Peter: Maybe your wife is one of the good ones. they do exist, but I know a lot of bad ones. Too many take the short route because they are, at their very core lazy. Twenty years later, they are the ones sitting on their fat asses shoving chocolate in their faces and reading a magazine at the nurses station and ignoring call lights.

Nursing is also the only field I can think of where an AD makes the same starting salary as a BS. It isn't right, it isn't fair, and it absolutely does compromize patient care.

Healthcare is pretty adversarial. Someone gives you a pat on the back, get to the ER immediately to have the blade removed.

I was a paramedic first, and completed my training as a Clinical Lab Scientist, with ASCP acreditation as I could as a military wife.

There are no two-year med techs. Why is that? It is because we are too fucking important. We take the guesswork out of the doctors job. Without us, doctors, nurses and especially patients are all screwed.

The nurses hate us because we make them do things right, and when one of us writes up one of them - the are gone, fired, inelligible for rehire. Doctors tend to not care for us much either, because they know that we are every bit their intellectual equals and have no problem reminding them of that fact when they give us reason.

It is the rare lab professional who fucks up a blood transfusion. Those mistakes always - and I do mean always - are the fault of the nursing staff.

Posted by: Global Citizen on September 19, 2006 at 11:12 PM | PERMALINK

You are beating around the bush of something I have been wondering about. Specifically - how do we sell universal healthcare to the large number of people whose job will be impacted it?

Government providing a transitional safety net would be my suggestion. Just dont ask me for specifics! Comments welcome but posting by Kevin on the subject would be greatly appreciated.

Posted by: aldogee on September 19, 2006 at 11:37 PM | PERMALINK

Job training.

Posted by: Global Citizen on September 19, 2006 at 11:39 PM | PERMALINK

Gyp: My husband says that when I get going, I'm an equal opportunity offender. I say that I am not prejudiced, I hate everybody.

Give me the proper motivation, and I'll give doctors a good old-fashioned ripping too.

Posted by: Global Citizen on September 19, 2006 at 11:46 PM | PERMALINK

I have been thinking about the last few nursing errors that had potentially life-threatening results. All that come to mind involved ADN's - not kidding, and not being mean. Being honest.

A heparin overdose. Heparin is an extremely potent blood thinner used after many surgical procedures, especially heart surgery and joint replacements because of the clot risk involved in these procedures. ADN lost her job and her license. It was not her first offense.

An ortho patient after knee replacement was given 40 grains of morphine - twice in

A nurse sent a unit secretary from surgical ICU to the blood-bank to pick up units for two different patients. Neither of the ADN RN's checked the blood-bank wristband on their patient, neither matched the blood-bank numbers and both of them started units running that had been crossmatched for someone else. One patient, being AB-Pos (you could give him anything) had no adverse effects. The other patient, however, was sick within minutes and eventually lost a leg and was never the same. I was the bloodbanker. I testified for the patient, the hospital settled out of court, and both nurses voluntarily surrendered their license.

And we won't even get into the lack of specimen integrity that I have to deal with.

Posted by: Global Citizen on September 19, 2006 at 11:58 PM | PERMALINK

oops. Lost the orth patient story in an html error.

That patient was given an overdose of morphine, receiving 80 grains in less than 90 minutes. (That's what did it - I used the "less than" sign. I know better.) The result? Brain damage caused by anoxia. The reason? The first dose was not charted.

Posted by: Global Citizen on September 20, 2006 at 12:02 AM | PERMALINK

No matter how anemic the growth of healthcare is, it will not have a problem on the demand side as more and more people are getting older (Baby Boomers)

Posted by: Ryan on September 20, 2006 at 12:05 AM | PERMALINK

I haven't read al the posts so:

The bottom line measures the change form Feb 2001. So it has taken until August 2006 for the non-healthcare economy NOT TO LOSE JOBS.

Am I missing something, or is Kevin!

Sloppy, sloppy Kevin I say. Read the link.

Posted by: notthere on September 20, 2006 at 12:07 AM | PERMALINK

Whoops.

Ok. I take that back. I read that as month on month difference not overall.

Sorry.

Posted by: notthere on September 20, 2006 at 12:12 AM | PERMALINK

Associate degree nurses (the ones who will be entering the field next year, and whom I teach cellular biology to are not an awe-inspiring lot. They take one 5-hour chemistry class that covers general, organic and biochem basics.

You might want to have a look at the course requirements for various BSN programs. Just sayin'.

Posted by: Pee Cee on September 20, 2006 at 12:17 AM | PERMALINK

Specifically - how do we sell universal healthcare to the large number of people whose job will be impacted it?

Same way we sold outsourcing to the IT industry, and offshoring to the manufacturing industry.

Promise them riches and prosperity.
When it doesn't happen, it's not until the next guy's watch that the finger pointing happens.

Posted by: osama_been_forgotten on September 20, 2006 at 12:44 AM | PERMALINK

At least they take real chemistry. I have had to explain that if the molarity of human blood changes, people die pretty damn quick, and had them ask what molarity was.

Even business students at the university where I am a grad student have to take eight hours of science, five with a lab. The BSN requirements at all three of the schools I am familiar with (UMKC, KU Med and Rockhurst) are quite strenuous. One daughter is in medical school, one is in nursing school and is already accepted into the practitioners program for next fall. My husband is taking the requisite life sciences to get into Osteopathic school.

Everyone in my family is running toward medicine, (with the exception of our son, who is a unique individual and makes a living flying around on corporate dimes teaching ESL all over the world while he gets masters degrees in Linguistics and History) and I am running away from it as fast as I can.

To get my cerification, I had to take 25 hours each of chemistry and biology, 10 hours of calculus plus classes in statistics and trig, and 60 hours of liberal arts. After I earned mt bachelors degree, I had a clinical year. My job is what is known as a "four-plus-one" career field.

I have very high standards, but unfortunately I do not make the rules. If I did, it would be a lot different landscape.

Posted by: Global Citizen on September 20, 2006 at 12:46 AM | PERMALINK

Good night, all, I'm all in. I will see you tomorrow - if a gang of ADN RN's don't break into my house and OD me with Heparin and Morphine and cross-transfuse me for having the audacity to say that they are not properly educated.

Posted by: Global Citizen on September 20, 2006 at 1:17 AM | PERMALINK

Global Citizen, with two soon to be doctors in your family, welcome to the dark side. I guess I'm too young- I've never heard of morphine dosed in "grains," just mgs.
Anyone here still want to go get their back surgery in Thailand?

Posted by: gyp on September 20, 2006 at 2:18 AM | PERMALINK

The BSN requirements at all three of the schools I am familiar with (UMKC, KU Med and Rockhurst) are quite strenuous.

On the science side, it's quite common for students to take *one* semester of freshman chemistry only. Some BSN programs allow one semester (4 credit hours) of GOB to substitute, and I know of at least one program that doesn't require a college chemistry course at all (they require 4 credit hours of "science".) If you've not looked at BSN program course requirements recently - and at more than a few schools. BSN programs have grown like weeds over the past few years, you might want to do it again. There's a move about to "streamline" course requirements, eliminating things like ... well, chemistry and biology.

Posted by: Pee Cee on September 20, 2006 at 8:34 AM | PERMALINK

You know what they say about old habits, Gyp:)

Posted by: Global Citizen on September 20, 2006 at 8:40 AM | PERMALINK

One partial explanation for the disparity may be that strong productivity growth in the overall economy has caused less workers to be hired (substitution of capital), but this effect is less apparant in the labor intensive, inefficient health industry

Posted by: Jonathan on September 20, 2006 at 9:08 AM | PERMALINK

I guess it's obvious that nurses don't get to hide behind their "angel of mercy" misnomer with me, isn't it.

I know from medicine - I have seen too much with my own two eyes, and nobody gets a pass.

Posted by: Global Citizen on September 20, 2006 at 9:59 AM | PERMALINK

Ron,

she walked across a street to scream at some dolt who was letting his 2 year old ride with him on his riding lawn mower.

I watched my neighbor mow his lawn with his push mower and his 3 year old son 'helping' by walking in front of my neighbor holding the handle halfway down. The kid's feet were within inches of going under the mowing deck every step he took.

What a maroon!

Posted by: Tripp on September 20, 2006 at 10:17 AM | PERMALINK

The healthcare insurance industry should be treated like a utility.

Healthcare is not a utility, but insurance is.

Create either regulated private-for profit or private-not-forprofit, or private-nonprofit or cooperative (ala electric coops) entities. Give them monopoly status and regulate them.

I would use a model resembling the Bell system circa 1979.

Like any utility, healthcare is more efficient the wider the net, bring affordibility to everyone.

For the transition, I would instruct every state to pick a local private health insurance firm and empower them to buy all the health insurance policies or companies in the state - in a quasi-eminent domain arrangement.

Then I would have the state companies amalgamate along the lines of the baby bells.

The regulator regime's boards as well as all the state regulatory boards as well as all the baby-insurance cos would have on their boards representatives from each major interest groups: Consumers, Doctors, Nurses, Dentist etc...

This way we have a smooth transition, universal coverage (ala the phone industry), single payer, and yet PRIVATE health insurance. Both Republicans and Democrats can be happy.

But I would settle for universal medicaid in the short run.

What I don't understand is why Republicans so hate the American public.

It's that public that not only allows them to have property rights necessary to accululate wealth, but fights and dies to protect that property right.

How is it that they can't concede decent reasonable and affordable health care to their fellow citizens, whom they rely on to protect their property rights?

Ingrateful letchs.

Posted by: Bubbles on September 20, 2006 at 10:18 AM | PERMALINK

Gyp, I have been lurking around the dark side for years now. My children's Godfather is a physician, my husbands best friend from high school. I went to a year of med school at U of A in tucson before we moved on to another base. When I started we actually thought I would be there long enough to finish, since Titans were only in three places and my husband was in the chain of command at Davis-Monthan.

If people think I am hard on docs now, just wait until my kid graduates and I sleep with one every night.

Posted by: Global Citizen on September 20, 2006 at 11:18 AM | PERMALINK

I think the reason why Madel's argument raises a troubling point was raised in part by David above - high and rapidly growing healthcare costs hurt US manufacturing and worsen an already bad trade defecit - but also because the main driver of private sector job growth over the past three years outside of health care has been the construciton industry. In addition, other occupations associated with the housing market (real estate brokers, mortgage brokers, etc.) have also been important contributors to job growth. The fact that the housing bubble is now deflating suggests that much of these employement gains will be reversed, with rather dire consequences for the non-health care private sector.

Posted by: Rich C on September 20, 2006 at 11:51 AM | PERMALINK

Kevin,

I've got a new chart for you here that answers your objection.

http://www.businessweek.com/the_thread/economicsunbound/archives/2006/09/healthcares_sha.html

Healthcare's share of recent private job growth is 32% and rising, as the rest of the labor market slows.

Posted by: Mike Mandel on September 20, 2006 at 1:15 PM | PERMALINK




 

 

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