Medical employment growth, unemployment, and the opportunity cost of health care

This policy note examines the relationship between the growth in the share of the workforce in medical care and the shares of workers who are unemployed, working in services or government employment, or working elsewhere in the economy. These changes provide measures of the opportunity cost of higher medical care spending, the majority of which is on labor. Using state data over the period 1990–2010, we find that, in years of high economy-wide unemployment, growth in medical employment in a state reduces the unemployment rate significantly; it does not appear to displace employment in other services or government employment. In periods of low economy wide-unemployment, the growth in the medical employment share does not reduce unemployment. We argue that the opportunity cost of higher medical care employment may sometimes not be so high in terms of real labor resources, nor in terms of employment for needed government services.