Health spending and health employment are surging in Australia. But it's not inevitable, as the experience of other countries shows. And it's not necessarily being driven by the ageing population.
It’s Australia’s fastest-growing industry by employment, rivalled only by our burgeoning services sector and the mining industry. It’s the biggest single employer of Australians, with one in eight of us working in it. And it shows no signs of slowing down. Right now, nearly 1.4 million Australians work in the health and social care sector. On current rates of growth, before the decade is out, one in seven of us will be in the sector.
As the Grattan Institute pointed out yesterday in its look at Australian government budgets
, rapidly growing healthcare spending is putting significant pressure on budgets. But the rapidly growing health workforce has big implications for the rest of the economy. Where will we get the doctors, nurses, dentists and physios of tomorrow? What pressures will that place elsewhere? These are the sorts of issues the Commonwealth has an entire division within the Department of Health set up to deal with (Melissa Sweet at Croakey
has looked at these issues
How did we end up with health as our biggest employment sector? It's natural to think that our ageing population has caused that, but the answer is more complicated. This chart drawn from ABS industry employment data shows the growth of health as a proportion of employment against the rise and fall of other industries.
The sector has enjoyed similar growth to professional services, albeit from a higher base. But unlike that sector, healthcare has had the benefit of continuing to grow through recessions, at a time when other areas faced retrenchment. So, for instance, manufacturing, which faced the twin assault of tariff cuts and a recession, fell precipitately between 1989 and 1991 in terms of employment, while health grew strongly, and then maintained its level of employment for the rest of the decade. Health employment got another kick around the time of the tech wreck and the early 2000s slowdown, which sent it above 10% of the workforce for the first time. And the sharpest growth of all was during the financial crisis, when the sector rapidly climbed to 11% of the workforce. Nor has it slowed since then.
And compare construction, an industry highly sensitive to economic conditions: in both the early 1990s and during the GST-induced slowdown in the sector, sector employment slumped toward 7%. While the Rudd government's stimulus packages minimised the slump in employment during the financial crisis, once the First Home Owners' Boost ended, it fell.
The resilience of the health sector in continuing to add jobs even during economic slowdowns, which turbocharged its rise to become the biggest employer in the economy, isn't entirely because it is primarily government-driven. The United States, where the private sector plays a much bigger role in its absurdly expensive and inefficient healthcare system, has seen similar resilience. This graph from a New England Journal of Medicine
article of the US healthcare workforce as a proportion of non-farm employment (in contrast to the ABS data above, which is all employment) shows the US healthcare workforce similarly surging during economic slowdowns: