In earlier postings, I've discussed the rise of health care as local economic development. Today's Wall Street Journal is running a page 1 story on this economic trend -- Factories Fading, Hospitals Step In:
Growth in health care is fueling local economies across the country, as medical facilities replace factories. In Duluth, Minn., 20% of the jobs are in health care, compared with 14% a decade ago. In the Canton, Ohio, area, which lost the maker of Hoover vacuum cleaners and dozens of other manufacturers, the health-care industry is expanding rapidly. A similar story is unfolding in Anderson, Ind., once a major producer of cars and car parts.
There are downsides to health care's ever-increasing role. A community that relies on health jobs can end up with a weaker economy, one overly dependent on government programs like Medicare and Medicaid. Greater inequality is a risk, too. In health care and other service industries, there tends to be a wider income gap between what the highest- and lowest-paid workers earn than there is in manufacturing. Surgeons can have salaries in the high six figures, while personal-care attendants often make little more than minimum wage.
The Journal story misses two of the other problems with relying on health care as an economic driver. The first is the rise of medical offshoring (as I've discussed in a couple of earlier postings). Health care is not locally rooted any more. People can travel -- either to major facilities in the US, such as the Mayo Clinic, or to cheaper facilities abroad. The second is the need for this type of "export" to be helpful to the local economy. Every local economy needs to produce something it can sell to others. Unless the health care facility brings in patients from outside the local economy, it can not replace the factory as an economic driver.
Therein is the problem with the health care economy (and the service economy in general). If localized services are to be an economic engine, they need to be tradable to earn export revenues. But if they are tradable, they are subject to the same competitive pressures as goods trade. In other words, a shift to a service economy doesn’t solve the trade problem. You still have to be globally competitive – that is the nature of the economic treadmill we are on.
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