A "mercantilist jobs program for depressed cities"

This tweet from a correspondent at Kaiser Health News caught my eye the other day:



It's an interesting point!

Turns out it's a response to a blog post ("The New-Economy has Created a Trade Deficit in Small Cities and Towns. Healthcare Spending is the*Bulwark"). The author argues that the robust economies of booming urban centers no longer generate the economic benefits for their surrounding secondary cities the way they once did (in terms of dollars flowing from the former to the latter)...except when it comes to health care.

Today, even though there has been some economic revitalization (best symbolized by the repurposing of a couple of mills into micro-breweries and craft businesses) Lewiston, like most secondary New England cities, shows nowhere near the degree of economic activity found a few hours away in central Boston. . . Given Lewiston is 130 miles from Boston and a relatively easy drive, the obvious question is why Boston’s prosperity has not extend to its peripheral secondary centers.

In a recent and important*NYT article, Emily Badger argues the reason is that*there has been a fundamental shift in the relationship and flow of dollars between urban centers and secondary cities.* Her first point is that the new economy doesn’t rely on secondary centers to serve as producers in the supply chain. *

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Now here is the interesting things about healthcare: it remains a local, high touch service business. *It turns out that the largest employers in many regional communities are healthcare delivery systems. * Around Lewiston, for example, the first and third largest employers are healthcare companies. *

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This is an interesting dynamic. *Given that the largest purchaser of healthcare services is the federal government (via Medicare, Medicaid etc.) what we’re seeing, *I think, is in effect an “export” of local services to “buyers” from “away”. **This time the flow of dollars is from highly taxed (and young) urban areas into healthcare systems in (older) places like Lewiston. *And, since the largest expenses at most healthcare systems are salaries, these dollars stay in the community. * It’s an interesting antidote to the trade deficits found in secondary markets in the innovation era.

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I've made the point before that the challenge we face is that health care is increasingly what we do. (E.g., "Healthcare On Pace to Become Largest Job Sector in U.S." or "Healthcare drives yearly job growth.")

Per the Bureau of Labor Statistics, no job sector has grown more in the last decade or is projected to grow more in the next:



Health care is what's propping up many distressed areas:

Hospitals are particularly important in high-poverty areas. In each of the largest twenty U.S. cities, a health system is among the top ten private employers; in high-poverty communities, a health system is almost always among the top five.

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Indeed, health care is often pointed to as a source of hope in the job market: "As workforce bleeds men, health care jobs could be key to keeping them employed"

The rate of U.S. men participating in the labor force, meaning they're working or looking for work, has been declining for 50 years, a trend that could carry ramifications for economic growth as well as individual and family well-being. And more automation, particularly advancements in artificial intelligence, threatens to disproportionately hit traditionally male-dominated jobs going forward.

Manufacturing, agriculture and utilities, all of which employ mostly men, are projected to lose jobs over the next decade, according to the Bureau of Labor Statistics.

Meanwhile, nine of the 12 fastest-growing jobs in the U.S. are in health care, topped by occupational therapy assistants, physical therapy assistants and nurse practitioners, all positions that are held mostly by women.

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To get to the punchline of the above:

Health care costs (the Great Satan!) are heavily labor costs in hospitals and physician practices--and other corners of the health sector, too. So in a sense a big part of the health care cost problem is an employment problem: we've got too much of it!

I'm sympathetic to Hancock's point that health care isn't a jobs program. Clinically, organizationally, and bottom-line-wise that's not the best way to view it. But as a political and economic reality, to some degree it is a jobs program. Anyone coming in telling you they're going to cut 10, 20, 30, 40% of health costs is going to run into that. Sucking money out of those communities will have consequences, and they're the kind of consequences a representative government is inclined to prevent.

In particular, this is a reality the single-payer movement is going to have to grapple with very seriously and it's a conundrum it will have to solve (if it sticks with the claim that SP will usher in serious cost reductions): how does the political achieve what our political system is heavily incentivized--not by donors but by people, constituents--to prevent? And should it?