Healthcare jobs and the Great Recession

The Great Recession, which began in December 2007 and ended in June 2009, had a devastating effect on employment and wages in the United States.¹ At its peak, the unemployment rate rose to a high of 10.0 percent (in October 2009) and reflected job losses across multiple industries. This downturn represented one of the longest and deepest recessions experienced in the nation since the end of World War II.

In assessing the overall economic and financial impact of the Great Recession, we found that 40 percent of American households had experienced some sort of distress, as measured by unemployment, negative home equity, arrears in mortgage payments, home foreclosures, or substantial losses in retirement savings.²

In contrast, healthcare appears to have been a bright spot in the American labor market economy, as it was during previous recessions.³ A U.S. Bureau of Labor Statistics (BLS) analysis indicated that healthcare employment continued to grow during the Great Recession, albeit at a slower pace than during the 1990–91 and 2001 recessions.⁴ From a historical perspective, healthcare appears to have been resistant to, if not immune from, the usual job losses associated with previous recessions.⁵

While there has been extensive research demonstrating the relationship between increased economic activity and increased employment in the healthcare arena, less attention has been directed at how the healthcare job market responded to the Great Recession and how this response compared with trends in overall employment from 2001 through 2014. The analysis in this article provides answers to these questions.

Research issues

This article examines whether healthcare jobs were immune from the negative effects of the Great Recession. It attempts to answer the following three questions and uses two timeframes (2001–14 and, to focus on the downturn, 2007–10) to do so:⁶

1. What general trends in employment and in average wages occurred in both the national economy and the combined healthcare industries during these two periods?
2. Did certain healthcare industries experience similar trends in employment and wages during the same timeframes?
3. Did geographic location have an influence on the national and industry results?

The answers to these three questions should provide additional industry insights into how the healthcare labor market responded to the Great Recession.⁷

Data

Data for this study are drawn from the BLS Quarterly Census of Employment and Wages (QCEW) program. The QCEW publishes quarterly wages and a quarterly count of employment (reported by employers) covering more than 95 percent of all U.S. payroll jobs. This database is used to analyze employment and wages in the national economy as well as in healthcare. The data refer to the first three subsectors of the healthcare and social assistance sector as defined by the North American Industry Classification System (NAICS). Because the sector consists of ambulatory healthcare services (NAICS 621), hospitals (NAICS 622), nursing and residential care facilities (NAICS 623), and social assistance (NAICS 624), we do not use the term “healthcare sector” in this article. Our discussion of healthcare jobs refers to NAICS 621, 622, and 623. All data in the QCEW refer to employment and wages in the private sector and exclude government employment and wages.⁸

To provide additional insights, we analyze five major metropolitan counties that include major U.S. cities (shown in parentheses): Los Angeles County, CA (Los Angeles), New York County, NY (part of New York City), Cook County, IL (Chicago), Harris County, TX (Houston), and Maricopa County, AZ (Phoenix). Also, the healthcare data are partitioned, both nationally and regionally, into specific employment areas: general medical and surgical hospitals; offices of physicians, except mental health; skilled nursing care facilities; and home healthcare services.

Healthcare employment

Throughout the nation, healthcare employment increased by 31.6 percent, or 3.5 million jobs, during the period 2001 through 2014. By contrast, total nonfarm employment grew by 5.7 percent, or 6.3 million jobs, during this same period. Thus, during this 13-year timeframe, 56.1 percent of all national job growth occurred in healthcare. (See figure 1 and table 1.)

Job growth in the national economy, however, was anything but steady. Total nonfarm employment decreased by 2.2 million jobs (2.0 percent) from 2001 through 2003, increased by 4.2 million jobs (3.9 percent) from 2004 through 2006, decreased by 7.8 million jobs (6.9 percent) from 2007 through 2010, and increased by 7.4 million jobs (6.8 percent) from 2011 through 2014. (See figure 2.)

In contrast to the uneven national job picture, job growth in the healthcare industries was steady, averaging more than 270,000 new jobs each year over the 13-year period. This steady increase in healthcare employment, coupled with the marked fluctuation in national employment, points out the importance of the healthcare industries to the national economy. In 2001, healthcare jobs represented 10.2 percent of the national job base. By 2014, the share had increased to 12.7 percent, or 1 out of every 8 jobs in the nation. During the Great Recession, healthcare employment expanded, increasing by 852,000 jobs, or 6.6 percent.

Healthcare wages

Concentrating on employment presents only a partial picture. We must also consider the impact of the recession on overall wages. During the 2001–14 period, average wages in both the healthcare industries and the national economy increased.

In 2001, the average healthcare worker had a yearly wage of $35,220. By 2014, this wage had increased by 45.6 percent, to $51,276. In the overall economy, yearly wages increased by 41.9 percent during the same period, from $36,157 to $51,296. We note that in 2001, the average wage in the nation was $937 higher than the average healthcare wage. By 2014, the gap had narrowed: annual wages in healthcare were only $20 less than the average national wage. (See table 2.)

Despite the recession, average wages rose in both the national economy and healthcare. For healthcare jobs, the average annual wage increased by 7.8 percent from 2007 to 2010, rising from $44,054 to $47,503. For the nation as a whole, the increase during the same period was 4.7 percent, as average wages rose from $44,362 to $46,455.

Healthcare industries

Examining the employment and wage trends of the largest industry groups within healthcare can provide a more detailed look at the effect of the recession on healthcare jobs.

There are 30 industries within healthcare. According to 2001 data, three specific industry groups—general medical and surgical hospitals (which accounted for 34.1 percent of total healthcare employment in 2001); offices of physicians, except mental health (16.8 percent); and skilled nursing care facilities (13.8 percent)—were the largest and made up the bulk of healthcare employment. In aggregate, they account for about 2 of every 3 healthcare jobs in the nation. We will now take a look at the 2001–14 employment and wages within these three industry groups and will focus specifically on the 2007–10 period to see how these industries were affected by the recession. (See figure 3.)

General medical and surgical hospitals

Employment in general medical and surgical hospitals increased by 644,000, rising from 3.8 million to 4.4 million, from 2001 to 2014. This was a 17.0-percent rise over the 13-year period, compared with the 31.6-percent increase for total healthcare industries. The increase in hospital employment represented almost 1 out of 5 additional jobs in healthcare during the period.

During the recessionary years of 2007 to 2010, employment in general medical and surgical hospitals rose by 3.3 percent, or 140,000, to 4.3 million. In contrast, overall employment in healthcare rose 6.6 percent during the same period. Job increases in general medical and surgical hospitals accounted for 16.4 percent of all healthcare job increases during the recession.

Although employment increases in the general medical and surgical hospitals industry group lagged behind the increases noted for the overall healthcare industries, an analysis of the growth in wages reveals an entirely different picture. While average wages for healthcare jobs increased, as noted previously, by 45.6 percent during the 2001–14 period, wages for the general medical and surgical hospital component rose by 63.1 percent (from $36,016 to $58,746).

In 2001, the average general medical and surgical hospital wage was $796 higher than the average healthcare wage. By 2014, this differential had grown to $7,470. In effect, although total healthcare industries and hospitals had 2001 wages which were similar, the 2014 average hospital wage ($58,746) was 14.6 percent higher than the average healthcare wage ($51,276).

Focusing on the 2007–10 period shows 9.9-percent growth in wages for the hospital component (from $48,277 to $53,059). This compares with an increase, as previously noted, of 7.8 percent for the average healthcare wage during the same period.

Offices of physicians

In terms of employment, the second largest industry group within healthcare is offices of physicians, except mental health. Over the 2001–14 period, employment in this group increased by 29.0 percent, rising from 1.9 million to 2.4 million. This percent increase is similar to the 31.6-percent increase recorded for total healthcare jobs.

During the 2007–10 period, employment continued to increase, rising 5.2 percent, from 2.2 million to 2.3 million. However, although this percent increase in employment surpassed that recorded for the general medical and surgical hospital component, it lagged behind the percent increase in jobs noted for total healthcare during the recessionary timeframe.

As might be expected, wages in offices of physicians, except mental health, were the highest recorded in the entire healthcare arena. The 2001 average wage of $59,452 was 68.8 percent higher than the average healthcare wage. During the 13-year period from 2001 to 2014, average wages in the offices of physicians, except mental health, component increased by 40.5 percent to $83,527, a level that was 62.9 percent higher than the average healthcare wage.

From 2007 through 2010, average wages in offices of physicians, except mental health, rose 8.0 percent (from $70,987 to $76,666), which was similar to the average increase for healthcare jobs overall and higher than the percent increase noted for the hospitals component.

Skilled nursing care facilities

The third component we examined was skilled nursing care facilities. During the period from 2001 through 2014, employment in this component grew by 7.2 percent, from 1.5 million to 1.6 million. This percent increase in employment was notably less than that recorded for the hospitals and physician offices components, as well as that for the overall healthcare segment.

During the 2007–10 recessionary years, employment growth in skilled nursing care facilities was 3.7 percent, or 59,113 jobs.

In 2001, wages in the skilled nursing care facilities component were 37.9 percent less than average wages in the overall healthcare segment and also less than the average wages in both the hospitals and physician offices components. By 2014, the average wage for skilled nursing care facility workers had grown 40.8 percent (from $21,888 to $30,808), but the earnings gap between the wages of these workers and all healthcare workers widened by 2 percent.

During the period from 2007 through 2010, average wages for skilled nursing care facility workers increased by $1,565, from $27,366 to $28,931, or 5.7 percent—the lowest percent increase recorded among the healthcare industries, but still greater than that for average wages in the national economy.

Home healthcare services

Home healthcare services accounted for less than 6 percent (or 635,348) of all healthcare jobs in 2001 and less than 9 percent (or 1.3 million) of all healthcare jobs in 2014. However, home healthcare services experienced explosive growth. During the 13-year period, home healthcare services employment increased by 97.8 percent. Of the total employment growth in overall healthcare from 2001 through 2014, more than 1 out of every 6 jobs was in the home healthcare component.

During the 2007–10 period, home healthcare employment increased by 18.3 percent, or 167,707. Given that employment growth in overall healthcare during the same period totaled 852,000, 1 out of every 5 new jobs in healthcare was attributable to home healthcare.

Wages in home healthcare increased by 41.4 percent from 2001 through 2014 and 7.9 percent from 2007 through 2010.

Geographic differences

To present a more complete picture of the effects of the recession on employment and wages in healthcare, we analyzed data for the five largest (in terms of total employment) counties in the country (listed earlier). (See figure 4.)

Los Angeles

In 2001, there were 3.5 million private sector jobs in Los Angeles County, of which 295,946 (8.4 percent) were in healthcare. By 2014, healthcare employment had risen by 29.1 percent, or 86,175 jobs, and accounted for more than 1 out of every 10 jobs in Los Angeles County. In comparison, overall employment in the county had risen by less than 3 percent, to 3.6 million. Not including the healthcare jobs, overall employment rose by only 0.5 percent, or 16,460 jobs.

During the 2007–10 recessionary period, overall county employment contracted by 325,857 (9.0 percent), from 3.6 million to 3.3 million. By contrast, during the same period, jobs in healthcare increased from 331,527 to 351,334, or 6.0 percent.

In 2001, the county’s average wage ($40,246) was 4.1 percent higher than the average healthcare wage ($38,670) and 11.3 percent higher than the average national wage ($36,157). By 2014, however, the county’s average healthcare wage had risen to $56,287, which was 1.8 percent higher than the average county wage of $55,311.

During the years 2007 through 2010, overall average county wages increased by 5.2 percent (from $49,464 to $52,027). At the same time, average healthcare wages increased by 8.1 percent (from $49,079 to $53,069). At the start of the recession, the average county wage was roughly the same as the average healthcare wage. But by 2010, the average healthcare wage exceeded the average county wage by 2.0 percent.

New York

In 2001, there were 1.9 million private sector jobs in New York County, of which 7.2 percent (135,748 jobs) were in healthcare. By 2014, overall employment in the county had reached 2.2 million, an increase of 172,963, or 9.2 percent. In healthcare, employment had grown to 168,359 jobs, an increase of 32,611, or 24.0 percent. In 2014, about 1 of every 12 New York County jobs was in healthcare. Interestingly, during this 13-year period, roughly 1 of every 5 new jobs in the county was in healthcare.

During the period from 2007 through 2010, healthcare employment remained relatively static. Of note, healthcare employment actually decreased during 2008, by 1.6 percent (a decline of 2,378 jobs) from the previous year—a pattern markedly different from the national experience. Total employment in New York County during the recessionary period decreased by 4.0 percent (or 76,299).

Largely because of the high wages of New York County’s finance industry, the wage pattern reported for New York County differed markedly from that reported for the nation and for the other counties we analyzed.⁹ For example, the average New York County wage in 2001 was $81,828, which was 71.2 percent higher than the average healthcare wage of $47,808. By 2014, the New York County wage had increased to $118,399, a rise of 44.7 percent. In healthcare, the average New York County wage had risen to $71,298 by 2014, an overall increase of 49.1 percent and the highest average healthcare wage of all five areas. By 2014, the average New York County wage was 66.1 percent higher than the average New York County healthcare wage. The wage differential between all other average wages and healthcare wages from other regions in this study ranged from less than 1 percent to 15 percent. New York had both the highest overall average wages and the highest healthcare wages in 2014.

During the recessionary period, average wages in New York City decreased by 3.1 percent, from $112,116 to $108,634. By comparison, healthcare wages in New York County grew by 12.3 percent, from $58,945 to $66,195.

Chicago

In 2001, there were 2.3 million private sector jobs in Cook County, of which 10 percent (230,989) were in healthcare. This percentage exceeded that recorded for both Los Angeles and New York. By 2014, employment in the county had decreased by 137,562 jobs, or 5.9 percent, to 2.2 million jobs. During this same period, healthcare employment increased by 15.9 percent (36,741 jobs) and represented 12.4 percent of all county jobs.

During the years 2007 through 2010, the county lost 8.1 percent, or 179,846, of its 2.2 million jobs. Counter to this trend, healthcare employment in Cook County increased by 2.4 percent, or 6,079 jobs. As a result, 12.3 percent of all 2010 employment in Cook County was in healthcare.

In 2001, the average Cook County wage ($44,165) was 16.9 percent higher than the average wage in healthcare ($37,764) and 22.1 percent higher than the average national wage ($36,157). The wage differential changed little over the 13-year period, and by 2014, the average Cook County wage ($59,931) exceeded the average Cook County healthcare wage ($52,245) by 14.7 percent. (This pattern was similar to that found in New York County.) During the 2001–14 period, Cook County’s average wage increased by 35.7 percent, while its average healthcare wage increased by 38.3 percent.

These wage relationships were relatively unaffected by the recession. In 2007, the average county wage ($54,283) exceeded the average county healthcare wage ($46,613) by 16.5 percent. By 2010, the gap had narrowed to a 12.0-percent differential, with the average county wage increasing to $55,185 and the average healthcare wage rising to $49,279. During the recessionary period, the average county wage increased by 1.7 percent, while the average healthcare wage increased by 5.7 percent.

Houston

In 2001, there were 1.6 million private sector jobs in Harris County. Of these jobs, 130,239, or about 1 of every 12, were in healthcare. By 2014, the county had reached an employment level of 2.0 million, reflecting an increase of 22.1 percent, or 361,926. However, healthcare employment in Harris County grew even faster, rising by 55.4 percent (72,166 jobs), to 202,405. By 2014, 1 out of every 5 new county jobs was in healthcare.

During the 2007–10 period, overall county employment decreased by 43,169 (2.4 percent), from 1.77 million to 1.72 million. In contrast, employment in healthcare increased by 11.2 percent (18,593 jobs), to 183,999. By 2010, healthcare constituted 10 percent of Harris County employment.

The average Harris County wage in 2001 was $44,782. By 2014, it had grown to $69,755, an increase of 55.8 percent. In 2001, the average healthcare wage ($38,930) was only 86.9 percent of the average county wage. By 2014, Harris County healthcare wages had increased by 38.1 percent, to $53,767, but were still below average county wage levels.

During the 2007–10 period, the average Harris County wage increased 5.3 percent, from $57,402 to $60,473. Similarly, the average Harris County healthcare wage increased 5.0 percent, from $46,174 to $48,490.

Phoenix

In 2001, Maricopa County had 1.4 million private sector jobs, of which 7.7 percent (105,317) were in healthcare. By 2014, employment had risen to 1.6 million—an increase of 189,294 jobs, or 13.9 percent. This percent increase in job growth was exceeded only by Harris County. By comparison, the increase in Phoenix healthcare jobs during the same period was 78.9 percent, as healthcare employment rose from 105,317 to 188,431. Nearly half of the county increase in employment during the 13-year period was in healthcare. By 2014, 1 out of every 8 Maricopa jobs was in healthcare.

During the 2007–10 period, employment in Maricopa County decreased by 217,216 jobs, or 13.5 percent, from its 2007 level of 1.6 million. In contrast, healthcare jobs increased by 14.2 percent, growing from 146,974 to 167,796 jobs. By 2010, healthcare accounted for 12.0 percent of the county’s employment.

In 2001, the average Maricopa County wage was $35,569. By 2014, the average Maricopa County wage increased to $49,187, a rise of 38.3 percent. Similarly, the county’s average healthcare wage increased by 38.6 percent (from $39,689 to $53,767). In 2001, the county’s average healthcare wage was 11.6 percent higher than the county’s average wage. By 2014, this differential was nearly the same, at 11.8 percent.

During the recessionary period, average county wages increased by 3.9 percent (from $43,573 to $45,290) while healthcare wages increased more slowly, at 3.0 percent (from $51,506 to $53,037).

Discussion

The data clearly show that the Great Recession had little, if any, negative effect on job growth in healthcare. During the recessionary period, national employment decreased by 6.9 percent, or 7.8 million. By contrast, healthcare employment increased by 6.6 percent, or 850,000 jobs. Given the extent and depth of the economic turndown, we conclude that healthcare employment was resistant to the effects of the recession.

Healthcare wages were also resistant to the economic downturn. For the national economy as a whole, and specifically for healthcare jobs, average wages increased during both timeframes under consideration. During the recession, when the nation shed 7.8 million jobs, the average wage increased by 4.7 percent. In contrast, the average healthcare wage rose by 7.8 percent during the same period. The large job losses recorded in the national economy may have given employers more flexibility and discretion in determining salary levels. Or perhaps the increasing demand for healthcare workers pushed their wages up relative to those of other worker groups.

As noted, healthcare comprises a multitude of employment settings. Three industry designations (general medical and surgical hospitals; offices of physicians, except mental health; and skilled nursing care facilities) account for 65 percent of healthcare jobs.

The largest healthcare industry setting, in terms of both employment and wages, is general medical and surgical hospitals. The recession did not cause a decline in hospital jobs, but this component’s rate of job growth—3.3 percent—was less than that for healthcare as a whole. Wages, however, tell a different story. Besides having the highest wages among the healthcare industry groups, general hospitals saw a wage increase of about 10.0 percent during the recession. This increase was notably higher than the wage increase for healthcare as a whole.

The second largest setting for healthcare employment, offices of physicians, also recorded job increases during the recessionary period. In this component, job growth was 5.2 percent, which trailed the increase in jobs in healthcare as whole. During the recessionary period, the wage growth of 8.0 percent for offices of physicians was in line with the increase noted for all healthcare.

The third largest healthcare-group category, skilled nursing care facilities, lagged behind the other two industry groups in terms of job and wage growth. As with the previous components, jobs and wages in skilled nursing care facilities increased during the 2007–10 period. However, these increases—3.7 percent in employment and 5.7 percent in wages—did not keep pace with job growth in overall healthcare or the other two health industry groups.

The national economy is, in reality, the sum of its regional economies. Therefore, gaining an understanding of the effects of the Great Recession requires examining these effects in different areas of the country. We found that while all areas saw increased employment and wages, there was notable geographic variability.

In Los Angeles, New York, and Chicago, the rate of healthcare job growth during the recession trailed the nation’s 6.6-percent increase in healthcare employment. In New York City, job increases in healthcare were less than 1.0 percent for the 2007–10 period. In Houston and Phoenix, however, the increase in jobs during the recession reached double digits.

Wage growth exhibited the opposite pattern. Increases in healthcare wages in Los Angeles and New York during the recession exceeded the 7.8-percent increase for the nation. In contrast, average wage growth in Chicago, Houston, and Phoenix failed to keep pace with the national average.

Conclusion

This article demonstrates that during the 2007–10 period, which encompasses the Great Recession, the healthcare jobs component of the American economy was not recession proof but was recession resistant. While job losses defined the national and various regional economies, healthcare continued its role as a jobs engine, which helped to partially offset the severe downturn that characterized the American economy. Will the healthcare industry continue to be a major job producer in the future? BLS industry and occupational long-term projections suggest that the long wave of healthcare employment growth will continue until at least 2026 mainly because of the aging of the U.S. population.¹⁰ In addition to these demographic changes, new medical treatment modalities and breakthrough pharmaceuticals are extending longevity and improving quality of life. Moreover, the expansion of healthcare coverage over the past several years has increased the demand for healthcare professionals.

Although the demographic drivers of demand for healthcare are dominant factors, the supply of healthcare services is also important to the levels and distribution of healthcare employment.