Health Human Resources: Cost Driver of the Canadian Health Care System

34 Pages Posted: 20 Sep 2007 Last revised: 1 Oct 2013

See all articles by Ruolz Ariste

Ruolz Ariste

Université Laval; Université du Quebec en Outaouais (UQO)

Jeff Carr

Human Resources and Skills Development (HRSD)

Date Written: July 14, 2003

Abstract

The Baumol cost-disease, where labour-intensive services become relatively more expensive over time, is explored as a contributor to rapidly rising costs in the Canadian health care system. Using data from a variety of sources for the period 1987-1999, health expenditure is decomposed to understand the role labour has played as a cost driver. The results of this paper do not strongly support the hypothesis that the Baumol cost-disease has been a force in the Canadian health care sector. Although labour income growth has been found to be driving up health costs for salaried health professionals, this has not been the case for the physicians who are paid on a fee-for-service basis; their earnings have actually fallen. The final result is an average annual increase of 0.66% in real earnings of all health professionals together. The strength of the conclusions is mitigated by the fact that we have no good measure of the price of health or health care (given that there is substantial technological change in the health sector). However, with slightly increasing labour income, it is difficult to argue that labour cost per unit of health has risen over time. The implications of our results are examined in terms of the consequences for other possible causes of rising health care costs.

Keywords: Health Human Resources, Baumol Effect

JEL Classification: I12

Suggested Citation

Ariste, Ruolz and Carr, Jeff, Health Human Resources: Cost Driver of the Canadian Health Care System (July 14, 2003). Available at SSRN: https://ssrn.com/abstract=1015803 or http://dx.doi.org/10.2139/ssrn.1015803

Ruolz Ariste (Contact Author)

Université Laval

2214 Pavillon J-A. DeSeve
Quebec, Quebec G1K 7P4
Canada

Université du Quebec en Outaouais (UQO) ( email )

Case postale 1250
succursale Hull
Gatineau, Québec J8X 3X7
Canada

Jeff Carr

Human Resources and Skills Development (HRSD) ( email )

140 Promenade du Portage
Ottawa, Ontario K1A 0J9
Canada

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