Healthcare employment has witnessed a remarkable surge in recent years. Contrary to certain prevailing views, it isn't solely attributed to increased government outlays. The pandemic played a significant role in creating worker shortages within the healthcare sector, which are now gradually being addressed.

Unraveling the Dynamics of Healthcare Employment Growth

Historical Growth of Healthcare Employment

In the past decades, healthcare employment in the American economy has expanded at a faster pace than total employment. Since 1990, it has risen from accounting for seven percent to 11 percent of the total. This growth can be attributed to several factors. On one hand, there has been an overall increase in the consumption of healthcare services per person. On the other hand, the aging of the baby boomer generation has led to a higher number of older people, who consume a significant portion of healthcare services. People over 65 years old make up 18 percent of the population but consume 36 percent of healthcare services, as per a study by the Peterson-KFF Health System Tracker. Moreover, the number of 65+ individuals has witnessed a substantial increase. In the last decade, it has soared by 39 percent, while the under-65 population has grown by just three percent during the same period.

The Impact of the Pandemic on Healthcare Employment

The pandemic had a profound impact on the entire economy, with healthcare facing particularly pronounced labor issues. During the lockdown phase, many non-urgent offices and clinics were shut down. Some employees chose not to return to work even after their facilities reopened. Similar to many other sectors, the pandemic also triggered more retirements in healthcare. Those who were on the fence about continuing to work decided that this was an opportune time to retire, often influenced by their families to avoid potentially unsafe places like hospitals and clinics.A second significant factor was childcare. The majority of healthcare employees are women, with 79% being female in 2019. With schools closed, a large number of employees had to stay at home to take care of their children. This added to the existing workforce challenges. When healthcare managers attempted to resume normal operations, they found themselves short of staff. Even those who showed up at work in understaffed settings were stressed and exhausted, which led to a higher rate of voluntary quits. In 2018 and 2019, the quit rate in healthcare was relatively stable. However, from 2021 to 2023, it jumped by 25 percent. One nursing supervisor shared with me that registered nurses were not showing up for their shifts and were not even calling in. In her extensive career, she had never witnessed such a situation from this group, which she had previously regarded as highly reliable.

The Recent Rebound and Future Challenges

The recent rebound in healthcare employment is, for now, a recovery. As shown in the chart above, a simple trend line indicates the growth. This trend is based on historical gains in healthcare employment in relation to population growth, with an added emphasis on the 65-and-over population. Younger workers have filled the vacancies left by those who retired early. Schools are now consistently open, providing a sense of security for mothers who are now more comfortable returning to work. As the staffing levels have increased, workplace stress has decreased, and the voluntary quit rate has started to come down.However, healthcare managers now face longer-term challenges. The working-age population is growing at a very slow rate, while the 65+ population continues to increase. This poses significant implications for the healthcare sector. (I have written several articles on the labor challenge and potential solutions, as well as one on how artificial intelligence can enhance productivity in healthcare.)