Technology, skills, and health care labor markets

I examine the role of technological change in health care labor markets. One of the biggest issues in the U.S. economy over the recent past has been rapidly rising health care costs. Conventional wisdom holds the main factor driving these costs increases has been technological change. These changes in technology have lead to a direct transformation in the delivery of health care and have also lead to indirect transformations through the reshaping of the private and public insurance industry. My findings are consistent with the idea that technological change has resulted in an increase in demand for higher skilled workers in the industry, while being labor-saving among low-skill workers. The earnings of RNs and health therapists rose rapidly over the 1983 to 1993 period, declined between 1993 and 1996, but then began to rise again after 1996. It is generally believed that managed care has had a one-time cost reducing effect in the industry by eliminating some of the inefficiencies associated with fee-for-service health insurance (Newhouse, 1992). The results here suggest a similar finding in the labor market.