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Study finds healthcare sector largely immune to economic downswings

As the COVID-19 pandemic rages on, the economy and the healthcare workforce remain in the spotlight.

A new study examining the relationship between local economic conditions and healthcare employment during past recessions found the healthcare sector is particularly stable with respect to economic turmoil. In fact, when counties experience more severe economic downturns, healthcare employment seems to increase. The findings provide important insight that can help leaders determine employment policy during turbulent times.

“A lot of this differential employment response likely occurs because many health needs are not tied to economic conditions and because the federal government pays for a lot of health care,” said SPH’s Marcus Dillender, PhD, assistant professor of health policy and administration and a co-author on the study. “This helps compensate for any decrease in demand that might occur from people losing health insurance through an employer during a recession.”

The study examined the impact of macroeconomic conditions on both the healthcare labor market and the pipeline of healthcare workers in the U.S. receiving healthcare degrees during 2005-2017, a timeframe prior to the current pandemic.

Researchers used county unemployment rates from 2005, to 2017, the most recent year available at the time of writing. They utilized the Quarterly Census of Employment and Wage, which uses state and federal unemployment insurance records and reflects 95 percent of jobs in the U.S. The study focused on four subsets: nursing care facilities, home health care services, office of physicians, and general medical and surgical hospitals.

They found that healthcare employment as a share of total county employment is positively related to the unemployment rate. The study found that a 10-point increase in the local unemployment rate is associated with an approximately 1.27 percent increase in healthcare’s share of local employment.

However, the relationship is different depending on the overall direction of the national economy. An increase in the local unemployment rate during a national recession is associated with stronger growth in the healthcare sector than a similar-sized increase in the local unemployment rate during a period of national economic growth, according to the study.

To analyze educational outcomes, researchers utilized data from the Integrated Postsecondary Education Data Systems for the same time period.

They found the share of healthcare graduates is also positively related to the unemployment rate. An estimated 10-point increase in the unemployment rate was associated with a 1.8 percent increase in healthcare’s share of postsecondary graduates. It is also different based on the state of the national economy. However, an increase in the local unemployment rate during a recession is associated with weaker growth in the healthcare sector than a similar-sized increase in the unemployment rate during a period of growth.

Within subset categories, the study found the strongest relationship between local unemployment and healthcare’s share in employment is in physicians’ offices, and there was also a strong association when it comes to general medical and surgical hospitals. However, home healthcare services seemed largely unaffected by local unemployment.

While the state of the local economy does not seem to have a strong effect on the share of the workforce employed by hospitals and physicians’ offices, nursing care facilities grow their workforce more robustly when both the local and national economies are in a downturn, the study found.

Much remains unknown about the adjustments and lasting impacts for the healthcare sector associated with the COVID-19 era. But these findings can help provide a backdrop as policymakers consider ways to sustain the healthcare sector during future economic and public health turbulence.

“The COVID recession has been different than other recessions in that it is directly tied to changes in the need for healthcare,” Dillender said. “Initially, healthcare providers lost money as patients decided against having many of the elective procedures that are lucrative to providers, but stimulus bills allocated money to buoy healthcare providers, and healthcare demand has rebounded since the summer of 2019.”

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