Why Health and Education Could Hold off the Recession

Posted by: Michael Mandel on January 18

From my new story this week:

there’s a surprising force that could keep the bottom from falling out of the economy: the $3.5 trillion health and education job machine, which created 640,000 new jobs in the last year alone. Propelled by aging baby boomers and rising student enrollments, hospitals and schools are still hiring while almost everyone else is cutting back.

Could adding more nurses, teachers, and hospital orderlies really hold off a recession? The answer is yes—with an asterisk. What people don’t realize is that health and education combined make up the single largest source of jobs in the U.S., employing 28 million people, or about 20% of the total workforce. What’s more, government funds support many of these jobs, either directly or indirectly, making them less subject to the business cycle.

And this has implications for fiscal stimulus as well:

Or policymakers can do something different: boost outlays on education and health. Remember that in the 1930s, John Maynard Keynes forcefully advocated the idea that government spending could bolster the economy in a downturn. Today, increasing federal health and education grants to the states, while politically controversial, could be a quick and effective way of slowing the cutbacks in jobs when tax revenues turn down.

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Reader Comments

Ray Woodcock

January 18, 2008 10:00 PM

Health, maybe, to some extent. But it does not seem likely that massive, effective educational expenditures could be made on the rapid timeline needed to stave off recession.

david foster

January 20, 2008 08:06 PM

Expenditures in these areas will differ from the Keynesian stimulus of digging holes in the ground and filling them back up again only to the extent that they actually represent investments that will eventually have an economic payoff.

The performance of the K-12 public school system is so dismal that there's no reason to believe additional expenditures--as the system is structured today--would ever yield a positive return.

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About

Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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