In this blog and its associated Report Series No. 38 and Research InBrief No. 91 'Productivity in the context of healthcare', Chris Smart, NERI economist discusses the Irish economies healthcare and education.
Healthcare and education are two large and growing sectors in the Irish economy. While a large share of these services are delivered by the public sector, an increasing trend of market provision has emerged since the latter half of the 20th century. In the Irish context, this is especially true in particular types of activity such as elderly care, disability services, and pre-primary education, although particular parts of our education and healthcare systems rely almost entirely on state support for private actors to deliver vital services, either through fully private actors or by community and voluntary organisations, contracted to deliver public services on behalf of the state.
Although these services are technically being delivered by the market, very little is known about this economic activity, the characteristics of the firms involved, or how many workers are engaged and what their working conditions are.
Recent updates to Eurostat business statistics allow us to see economic indicators for the market activity in these sectors for the first time, giving us a novel insight.
Eurostat data for 2021 shows that around 62,000 and 178,000 people are working in market education and healthcare, respectively. This is equivalent to 32% and 55% of the respective workforces in these sectors. For particular activities, such as residential care, over 80% of those employed are employed outside the traditional public sector.
Additional indicators on wages, value added, and firm size give us a data-driven understanding of the market portion of these sectors for the first time, providing an evidence base to begin to understand the composition of these sectors and to assess their viability.
While there are limitations to assessing one year’s data in isolation, particularly 2021 being a year of significant disruption due to the COVID-19 pandemic, this paper provides a baseline for augmenting our understanding of wages, working conditions, and the viability of market health and education services.
The data highlights the disparity in outcomes between the various subsectors, and provides evidence on whether market provision of these vital services is adequate or appropriate.
What do these indicators tell us? That particular subsectors have large shares of market employment, and that particular areas are experiencing issues with providing adequate wages and maintaining affordability. Taking pre-primary education as an example, both wages per employee and value added per person employed are low, demonstrating an inability by the sector to operate a business model that pays workers properly and maintains viability.
This finding is not news to anyone working in that sector, and justified the significant interventions in the sector over the course of the previous government in the form of an Employment Regulation Order, subsidising wages to improve working conditions and retention, as well as providing subsidies to lower prices for customers and maintain viability for firms.
This pattern is visible in other subsectors, particularly some areas of residential care activities, and social work activities without accommodation. The question this poses is whether these other services, which rely almost wholly on funding from the state, have little to no ability to set prices for customers or wages for staff, and are clearly struggling to provide decent conditions and maintain viability, warrant a similar type of intervention. It also poses a question as to how much subsidisation and regulation these sectors can be subject to and remain market services.
These are services that almost all of us will eventually rely on, whether directly as we age and require support, or indirectly when our children need childcare, or our vulnerable relatives or friends require help. Ensuring these services are staffed properly and maintain viability is an issue all of us should care about.