Health Care Jobs Gap Remains Serious

Alex Brill and Grant M. Seiter | AEIdeas

Employment in the health care sector increased by 56,700 in June, more than double the average monthly pace in this sector during the last year, according to last Friday’s jobs report. Nevertheless, the sector is reeling from a lack of workers. This challenge is not new but was greatly exacerbated by the pandemic.

Employment in physicians’ offices, outpatient care centers, home health care services, hospitals, and nursing and residential care facilities is 175,600 below its February 2020 peak of 16.5 million. But, relative to a counterfactual, pandemic-free world, which assumes health care employment would have continued to grow at its pre-pandemic rate, the sector’s employment gap is more realistically 954,000 jobs. In June, only 367,000 experienced workers—that is, those unemployed individuals whose last job was held in the health care sector—were available for work and actively looking for work, according to the Current Population Survey (CPS) 

Another way to look at the state of the health care labor market is to compare the supply of available experienced workers to labor demand, measured by job openings.

The Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS) measures openings as all positions (full- and part-time) that are actively recruiting and unfilled on the last business day of each month. Table 1 reports these values alongside the level of available experienced workers from the CPS for the health care and social assistance sector. Health care employment is about 80 percent of this sector, which also includes individual and family services, community relief services, vocational rehab services, and childcare services. Job openings have been quadruple the number of experienced unemployed workers this year. (Unlike the CPS and the jobs report establishment survey data, the latest JOLTS data is for May.)

The number of available experienced workers surged during 2020 as employment sharply contracted during the early months of the pandemic. It has since returned to near its pre-pandemic level. But the number of reported job openings continues to rise sharply—nearly 70 percent higher in the first five months of 2022 compared to 2019.

The ratio of the number of available experienced workers to job openings indicates the relative tightness of the labor market. A ratio greater than one indicates that the supply of available experienced workers in a given sector is greater than demand for labor. A value less than one indicates that demand exceeds supply.

Across the entire US economy, that ratio was 0.7 in 2019, spiked to 1.9 in 2020, and dropped to 0.4 in May 2022 as employers across many industries struggled to find workers. But in health care and social assistance, the situation is much worse. The ratio of available workers to job openings was 0.4 in 2019, rose to 0.9 in 2020, and has been 0.2 in March, April, and May of this year. Across all sectors, health care and social assistance report the tightest labor market by this metric.

What are the causes—and, more important, the solutions—to the health care employment crisis? The added burden of working in health care during a pandemic led many workers to exit the sector, worsening the existing issues. Tight labor markets and rising wages in other industries may have also facilitated transitions to new careers.

For nurses and other skilled workers, there are significant barriers to entry associated with training and schooling that potentially affect the available supply of labor. And for health care support occupations, wages are much lower than the median for all US jobs.

Is there a role for public policy intervention? The industry is already heavily regulated and reliant on government reimbursement for care (Medicare and Medicaid), so it may be the case that existing government policies exacerbate the supply-demand imbalance and that fewer interventions are better than new ones. Some states are already taking steps to address the shortage through deregulatory actions. Health care providers should themselves also work to adopt new models of care delivery and seek strategies to automate or outsource administrative tasks. Such transitions will, however, take time.

June’s job growth is certainly good news, but if the pandemic has made anything clear, the health care sector is an essential part of the US economy, and we should be more concerned about its near- and long-term labor supply challenges.

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