Aging Workforce and Health Care Employment

There’s a common perception in economic discussions that an aging population – often defined as a growing population of retirees – drives health care employment, which sounds logical. In a general sense, the health care services and age have a “u-shaped” relationship – people need the health care industry the most at the beginning and the end of their lives.

Source: Idaho Department of Labor

This topic is especially important for Idaho as it has become a popular destination for retirees and is one of the nation’s fastest aging states. Low cost of living, bountiful recreational activities and a tax system favorable to retirees have often been cited as the reasons for this. Whatever it is that brings retirees to Idaho though, it is certain that they are indeed moving to Idaho in large numbers. Idaho has ranked in the top 10 among all states for the fastest growing retirement populations for several years.

So, does the influx of retirees foretell growth in Idaho’s health care employment? The experience of other states can be used as a guide. To begin, it is useful to evaluate whether or not the age of a population is related to the size of the health care industry at all. The most common measure of a population’s “agedness” is the median age – the 50^th percentile of the population’s ages.

The size of the health care industry can be measured using the “location quotient,” which measures the relative size of an industry in a given area based on that area’s population. A location quotient higher than 1 means that an industry is larger than average for a given area, while less than 1 indicates an undersized industry. For example, the location quotient of Idaho’s health care industry was 0.91 in 2014, which means the industry was roughly 91 percent relative to the size of the health care industry nationally. In other words, Idaho’s health care industry was undersized based on the size of the population.

When median age and health care employment are plotted on the same graph, as they are in Figure 1, it is clear that there is a positive relationship. A higher median age is strongly correlated with a larger concentration of employment in health care. There are several states, though, that seem to buck this trend. They are highlighted on the graph in blue. These states have relatively average median ages, yet they have health care industries that are either highly oversized or undersized. For reference, Idaho’s median age is 35.7, compared to 37.7 for the rest of the country.

These states have something in common. The six blue states with relatively oversized health care industries (above the line) are all northeastern states – Rhode Island, Massachusetts, Pennsylvania, Vermont, Connecticut and New York. These states rank among the healthiest in the country, based on a variety of official health statistics, according to the United Health Foundation. The blue states with the undersized health care industries (below the line) include Nevada and three southern states – South Carolina, Alabama and Mississippi. These states rank near the bottom of health rankings. In 2014 they ranked 38^th, 42^nd, 46^th and 49^th respectively.

Furthermore, it is interesting to note that, over the past 10 years, aging populations did not actually seem to drive growing health care industries in these states. Instead, the data shows that most states did not see much change at all in their location quotients, as seen in the Figure 2. This, combined with the anecdotal observation that location quotient seems to be connected to the health of the state, would suggest that a growing retiree population may not be the predictor of a large surge in health care employment. Indeed, the relationship may run the other direction. It could be that retirees are attracted to states that offer a good health care system and healthy lifestyles. Given that Idaho is ranked well above average on the health of the population, such a theory may apply.

Source: Idaho Department of Labor