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POLICY/POLITICS: Econ 101

I’m up at Spot-on taking explaining very basic economics to the unwashed masses in a piece called Back To School, Business Week and no I didn’t get to choose the title. The main point is that health care is not infrastructure nor is it manufacturing. It’s a service industry, like teaching English Lit.  Come back here to comment.


There’s been a lot of fuss in the last week about the BusinessWeek article that suggested that all employment growth in America in the last year had come in the health care sector.
Well that’s not too surprising. The money pouring into health care has
been going up at more than 10% a year since 2000 while the rest of the
economy has been relatively stagnant (at least compared to
historical growth rates). The non-employment sector of the economy
(i.e. corporate profits) has been growing much faster than the labor
sector. Health care, though, is a labor intensive business – you need
those nurses, techs, and even doctors to look after patients.
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3 replies »

  1. This comment has not much relevance to this blog but why are americans so naive when it comes to their health benefits? A person would be better off if healthy to buy a individual policy and have his employer set up a 105 reimbursement plan and reimburse for the premim. Also, why would an employer buy dental insurance or any insurance on the first $5,000 of claims? They save more than the risk and can deliver a better policy underneath using section 105.

  2. Those “English lit” workers spend every last penny of their fairly low salaries on goods that fuel the economy with the resultant sales taxes and corporation taxes going right back to government.
    Unless American workers are ready to work for non-union Toyota-like salaries, the service economy is here to stay. If Americans would live within their means and not buy larger houses than they need, send their kids to public schools, not buy pre-packaged lettuce, etc. they’d have plenty of cash to pay for healthcare.
    Heck, I take my lunch to work and save $4 per day over what my coworker spends. It costs me $1.50 for lunch, $5.50 for her.
    Add that up over a year.

  3. Matt, good post. It is remarkable how hard it is to get through to people these key points:
    1. We pay about twice as much as other developed nations for healthcare that is of comparable or worse quality. Our bang for the buck is atrocious. It is worse than atrocious: our high costs in and of themselves kill because some can’t afford the care. Others in effect work large portions of their lives in order to pay for the healthcare. How many millions of hours of work are needlessly spent on healthcare?
    2. The kinds of improvements that our healthcare system is geared to provide do not improve productivity enough to compensate for the costs. If we focused on preventing disease and promoting healthy lifestyles, we could probably show a more positive ROI than if we focused on disease management (and “management” is being charitable).

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