I want you to close your eyes — well, only for a moment — and think about how the Australian economy actually is, rather than what various industries say it is, or what commentators or politicians say it is.

There are different types of economies, of course, but the one I’m focusing on is the real economy that actually employs people.

Last year I pointed out that, based on the ABS’s detailed employment data, at the end of 2009, the health and caring sector had become our biggest employer, bigger than construction, retail or manufacturing, which is continuing the decline that set in in 1990s and that is now permanently below 1 million employees.

The ABS’s historical data show the health sector — which remember does not include the army of unpaid carers looking after relatives in the community — began picking up in the mid-1990s, but its expansion really set in in the past decade. In that period it has grown at about 1% every quarter every year, while the overall workforce has grown at 0.6% a quarter. But in the past four years, it has accelerated, moving towards 1.3% a quarter. Over the past 12 months, it has grown at about 2%, a high level of growth for a mature industry.

As an academic exercise, I extrapolated the past decades’ data from the ABS to the end of 2020. Based on that, health will employ just under 2 million Australians at the start of 2021, up from 11.4% of the workforce now to 13.7%. That’s misleading, though. The Australian workforce is unlikely to keep expanding at the same rate as it has over the past decade, as the population ages and boomers retire. And as we age, our demand for health services will naturally increase — driving still greater demand for health jobs. Using growth from the past four years, the health workforce will top 2.2 million in 2021, verging on 16% of all workers.

With any luck some the health reforms driven by Kevin Rudd and Julia Gillard will drive greater efficiency in the sector, but it’s unlikely to slow the growth of health employment. In fact, given the initial phase of the federal government’s health reforms consists of pumping more money into hospitals, the net effect in slowing down the rate of growth in health is likely to be limited.

Health is not merely the biggest sector, it’s among the fastest growing. There’s only limited market mechanisms within the health sector, which crimps the ability of the sector to mimic private sector employers and keep lifting salaries until they attract the workers they need. But what it has to its advantage is politicians, who are continually under the hammer to improve health services.

Once mining recovered from the GFC, it has been growing at 4%-5% every quarter. But it’s still tiny — in November last year it finally went over 200,000 people for the first time. Since the GFC, the second-biggest employer, retail, has grown at about 1.1%. Construction, next biggest, propped up by the BER spending, has managed about 1.5%, a level unlikely to be maintained as the BER disappears. After manufacturing, next biggest sector is education and training, which has been expanding at about 1.7%. Professional, scientific and technical services has actually declined over the past 12 months, but recent national accounts data suggests that may only be temporary.

The rapid growth in the health workforce, and the fact that that growth is unlikely to taper off any time soon, is the reason why governments are continually pumping more money into medical training programs, in a desperate effort to outrun the demographic impact of an ageing population.

And like other industries, health has its spruikers demanding more funding from governments. They’re not as rapacious as private sector rent seekers, but they’re even more effective because they can always invoke cases of underfunding, and the public is overwhelmingly convinced we don’t spend enough on health.

Problem is, unless we source the additional 600-900,000 health and social assistance workers that we’re likely to need in the next decade entirely from overseas, they’ll have to come from elsewhere in the economy. This will be the real “hollowing-out” of the Australian economy — not from mining, which would need to maintain its current surging growth for most of a decade to become a major employer, but from health and social assistance.

Tomorrow: subsidised growth and the skewing of the Australian economy.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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