EBRI Issue Brief

The Role of the Health Care Sector in the U.S. Economy

Oct 1, 1993 32  pages


  • This Issue Brief discusses factors that contribute to the growth of health care expenditures and the reasons that many individuals, employers, and policymakers consider health expenditures too high. In addition, it describes various industries that make up the health care delivery system and their role in the U.S. economy as employers, producers, exporters, and suppliers of research and development. The report also discusses the economic implications of rising health care expenditures for individuals, employers, and the federal government and the potential impact of proposed health care reform on the health care sector and the U.S. economy as a whole.
  • Health care delivery industries supplied 16 percent of net new jobs between 1980 and 1990. Related industries such as pharmaceuticals and medical equipment suppliers have higher than average research and development levels, in addition to a positive balance of trade. Moreover, while the total number of jobs in the private sector declined between 1990 and 1993, the number of jobs in the relatively high paid health services sector continued to grow.
  • In aggregate, employer spending on health care represents only 6.6 percent of total labor costs. In comparison, wages and salaries represent 83 percent of total labor costs. Consequently, the growth rate of health care expenditures has a smaller impact on the growth rate of total compensation than does the growth rate in wages and salaries.
  • Using job multipliers developed by the U.S. Department of Commerce, it is estimated that the 18,600 health care services jobs in Rochester, Minnesota in 1993 created another 32,000 jobs in the area. Any contraction of the health care sector in cities that have a large concentration of employment in health services would result in reduced employment in restaurants, retail stores, janitorial services, and other local businesses./li>
  • EBRI's simulations estimated that between 200,000 and 1.2 million workers could become unemployed as a direct result of a mandate that employers provide health benefits to their employees, assuming that wages and salaries did not adjust at all. Others find that approximately 50,000 individuals would lose their jobs, assuming that wages and other labor costs adjust downward to completely account for increased costs. As is apparent, the estimates of job loss (and of the total costs of the policy) are extremely sensitive to the assumptions used in the simulation.