Thank Seniors for Helping Us Get Through the Recession
How have seniors played such a key economic role? More than 1 out of every 6 residents (17.3%) of the Pittsburgh Region is over 65 years old, the largest proportion of any major region in the country. Social Security payments for retired seniors were increased in 2009 while salaries for workers were being reduced or eliminated, and seniors retained generous health benefits through Medicare while many private businesses were reducing health insurance coverage for workers. When our seniors spend their retirement income in stores, in restaurants, on entertainment, etc. they support thousands of jobs in our region, and providing health and personal care services to seniors creates jobs for thousands of additional workers here.
Spending by and for seniors is a big part of our economy. More than one out of every five dollars (21.2%) of personal income in the Pittsburgh Region now comes from “transfer payments,” two-thirds of which are Social Security and Medicare. (Other transfer payments include private pensions, veterans’ benefits, Medicaid payments, and unemployment compensation.)
Due largely to the many seniors who live here, the Pittsburgh region derives more of its income from transfer payments than any other major region in the country. That made a big difference during the recession – while total personal income in most large regions dropped by at least a billion dollars from 2008 to 2009, Pittsburgh was one of only 5 major regions that actually saw a small increase in personal income in 2009. Workplace earnings and investment income in the Pittsburgh region decreased in 2009, so if it hadn’t been for our high and growing level of senior-driven transfer payments, there would likely have been even more job losses here.
On top of that, the extensive medical and personal care benefits provided to seniors helped make health care one of the few economic sectors which actually added jobs in southwestern Pennsylvania during the recession. Many hospitals in our region receive more than half of their revenues from Medicare, most nursing home revenues come from seniors, and at least one-fourth of physician revenues come from Medicare patients.
Although seniors have helped reduce the impact of the recession here compared to other regions, we can’t lean on them too heavily to keep supporting our economy in the future. Seniors are receiving no increase in Social Security benefits for either 2010 or 2011, and private retirement plans have become far less generous than in the past. As a result, it’s likely that a growing number of seniors will be keeping or competing for the jobs that younger workers want.
We also can’t keep relying on the healthcare system as our primary source of new jobs, because we simply can’t afford to keep paying the insurance premiums and taxes that are supporting all of those jobs. A growing number of public and private sector initiatives are being implemented to keep people healthier, provide care in less expensive settings, and improve the quality and efficiency of healthcare services. Although these initiatives will improve the quality of life for both seniors and younger individuals and will help make businesses in other sectors more competitive, they will also result in major changes in both the number and types of jobs in health care.
Thirty years ago, Pittsburgh learned the hard way what happens when a region ignores the fact that its economy is highly concentrated in a single sector, particularly when there are signs that the engines which drove its success in the past are weakening. Today, over 116,000 jobs – one-tenth of all jobs in the Pittsburgh region – are in hospitals, outpatient clinics, and doctors’ offices. That’s both more jobs and a higher share of the region’s total employment than the steel industry represented in the 1970s. Consequently, even a small percentage reduction in healthcare jobs resulting from healthcare reform initiatives could have a significant impact on the region’s unemployment rate.
What should we do?
First, physicians, hospitals, and other healthcare providers need to be far more aggressive about redesigning their operations in order to deliver care as efficiently and effectively as possible. The Pittsburgh Regional Health Initiative (http://www.prhi.org/) has been working with a number of forward-thinking hospitals and physician practices to help them become leaders in the new era of accountable health care, but far more support is needed from health plans, businesses, and government.
Second, we need to focus on encouraging growth in the rest of our economy, particularly manufacturing, which has been the hardest hit during the recession. Creating a more competitive business climate, assisting entrepreneurs, and ensuring our schools produce an educated workforce should be top priorities for state and local leaders in 2011.
(A variant of this post appeared as the Regional Insights column in the Sunday, December 5 Pittsburgh Post-Gazette.)