America's health care system now accounts for approximately 18% of the country's GDP and the pharmaceutical industry is an integral part of it. According to the US Department of Labor (DoL), however, there is a crucial difference between pharma and health care. In terms of occupational classification, the DoL considers health care a service industry while pharma is a high tech form of manufacturing. This is a crucial distinction because while everyone knows that the August jobs report showed no net gain in US employment, sectoral changes beneath that figure revealed an even more disturbing trend. It turns out that the health care sector added 30,000 jobs last month, while construction, trade, transportation, utilities and hospitality were unchanged and manufacturing even lost 3,000 jobs.
Now any paying job is a gain in this recession and any sector that's hiring people is also a good thing, but in the long-term the movement of labor out of manufacturing and into health care services signals a bad direction for the American economy.
That might seem a puzzling statement. After all, health care is a clean industry, one that is relatively high tech and destined to continue growing as the U.S. population ages. Three or four generations of parents encouraged their kids to go into health care on the grounds that it's recession-proof. Except for the last point, much of that conventional wisdom is true, as far as it goes. The problem is that the income of health care's work force is highly stratified. Consider hospitals as an example. They have a few, well-paid, orthopedic surgeons, cardiologists and hospital CEOs at the top, and many more people below who just get by.
Manufacturing during periods similar to the present has historically benefitted the American economy in at least three ways. First, it was often a leading recovery sector whose growth sparked subsequent gains in other sectors. Secondly, manufacturing jobs in general paid higher wages and benefits than health care, retail and hospitality, so when manufacturers added employees, these new hires earned enough money to spend and create multiplier benefits through the economy. Finally, a large proportion of manufacturing employees until recent times were unionized, especially at the largest companies, and the contracts there set standards for workers in other sectors.
That calls attention back to pharma where average salaries were historically high and spin-off benefits to the rest of the economy were substantial. The pace of layoffs this year has slowed compared to 2010, when pharma led all commercial sectors in the number of dismissed employees. In fact the number of pharma layoffs this year through August is less than half of what it was last year at the same time. So far pharma trails government, retail, aerospace-defense and financial services in the number of employee layoffs.
But the trend line shows that pharma is continuing to shed jobs while hospitals, nursing homes, home care agencies and other health care businesses add workers. At the same time, the U.S. Census Bureau released this week the latest data on income and poverty, showing two-and-a-half million more Americans lived in poverty last year than in 2009. So the American economy shrinks the middle class and disproportionately benefits the very rich, those unconscionably wealthy few whom top Republicans sanctify as "job creators." Unfortunately neither those Republicans nor most Democrats find anything wrong if America's occupational structure resembles those of underdeveloped countries or health care organizations.
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