Title: Regime-dependent health care employment dynamics during recessionary periods
Authors: Luiggi Donayre - University of Minnesota - Duluth (United States) [presenting]
Lacey Loomer - University of Minnesota - Duluth (United States)
Abstract: The assumption that recessions are all alike is relaxed in studying whether U.S. healthcare employment is recession-proof. Because healthcare services are inelastic and largely driven by costs, we argue that economic conditions only impact healthcare employment to the extent that they affect the minimum number of necessary healthcare workers or healthcare costs. Specifically, using U.S. monthly data for the January 1991-June 2022 period, we estimate a threshold VAR that explicitly allows for regime-dependent negative demand and negative supply shocks in examining how healthcare employment responds to recessionary periods. When healthcare workers fall below a necessary minimum (or when labor costs are too high) as determined by an endogenously-estimated threshold, we find a large and significant reduction in healthcare employment during demand-induced recessions and a much smaller response during supply-induced recessions. Meanwhile, the response of healthcare employment to negative demand or supply shocks is negligible in the high-worker (high-cost) regime. By identifying the source of recessions and their effects on the minimum number of necessary workers and labor costs, our findings reveal that healthcare employment is not necessarily recession-proof.