Future manpower needs in the health care sector

These are some of the conclusions drawn by the researchers Erling Holmøy, Julie Kjelvik and Birger Strøm in the report Behovet for arbeidskraft i helse- og omsorgssektoren fremover (in Norwegian with an abstract in English – Future manpower needs in the health care sector). The need is projected up to 2060 by combining Statistics Norway’s population projections by age and gender, with information on, for example, the use of health care services, among women and men of different ages.

Strong increase in demand for labour is a robust conclusion

If the current use and standard of health care services continue for all ages, the most likely population projections mean that the demand for labour in the health care sector in 2060 will be more than twice the 2010 level. Compared with the projections in Report no.12 to the Storting (2012-2013) : Long-term Perspectives on the Norwegian Economy 2013, the health care sector’s share of total employment will increase from almost 11 per cent in 2010 to more than 17 per cent in 2060, assuming that unpaid care for the elderly by families increases at the same rate.

The assumptions of a constant standard of health care services and a doubling of family care, however, are unrealistic in light of historical experiences and realistic projections of economic growth and employment. If the standard measured in hours worked per user increases by 1 per cent per year, while family care remains at the current level of approximately 100 000 FTEs, staffing needs will be more than 4.4 times the current level in 2060. In such a scenario, the share of health care services would constitute 38 per cent of the Report to the Storting's estimated total employment in 2060. With today's working hours in the health care sector, the share of employed persons will be even higher. Such a radical and sweeping change in the Norwegian economy is likely to lead to adjustments that will modify development.

Better health among the elderly can reduce the demand

Part of the reason for the increase in life expectancy used in future estimates is likely to be better health among the elderly. In a scenario that intercepts such a development, the elderly's use of health care services will be reduced in each age group in line with the increase in life expectancy. In 2060, the health care employment that is needed to maintain the current standard of service will have increased to 1.7 times the 2010 level. Several factors can, however, weaken the negative correlation between better health among the elderly and the demand for health care services. Health improvements may in themselves be a result of increased use of health services, and more and more will survive in the age groups where use of health care services will nevertheless be relatively high. In particular, the group with dementia may see a sharp increase, since care for this group is relatively costly.

Several reasons behind increase in demand for health care services

The report also points out other reasons why the demand for health care services will increase in the future:

1. There are strong indications that the average person will spend an increasing share of their income on health care when income increases. The importance of this is strengthened by the fact that the elderly share of voters will also increase sharply.
2. Wage growth is likely to be stronger than productivity growth in care services and in some parts of the health sector (Baumol’s cost disease).
3. In the health sector, experience suggests that technological advances have led to increased production, also of relatively expensive services.
4. The strong increase in employment in the health care sector is not likely to be realised without the health care wages increasing more than in other industries.

The report also estimates the total effect on the public budget surplus of a given increase in tax-financed employment in the health care sector. In particular, revenues from employers’ National Insurance contributions, indirect taxes and taxes on profits will be reduced when production in the private sector is suppressed. With full suppression, i.e. unchanged total employment, this effect makes up 25 percentage points of the overall weakening of the public budget surplus.