As one of the biggest recipients of public revenues, health care plays a major role in Canada’s economic performance. While most people are generally aware of the sector’s high costs (over $200 billion or about 11.7 percent of gross domestic product in 2011), there is less understanding of its economic benefits. The health care sector delivers economic benefits on three levels: jobs, productivity, and innovation.
First, the health care sector is a major employer. The sector directly employs about 1.4 million physicians, nurses, and other health care providers and clerical and administrative staff, which represent about nine percent of total jobs in Canada.1 Indirectly, the sector also supports thousands of additional jobs through its supply chain: the purchase of medical supplies, clinical equipment, and professional services. About 45,000 Canadians are employed in pharmaceutical, medicine, medical equipment, and medical supplies manufacturing in Canada.
Therefore, directly or indirectly, the sector has a major influence on the careers of thousands of Canadians, many of whom are highly qualified professionals, who pay taxes and purchase goods and services from all sectors of the economy.
Second, the health care sector contributes to a more productive and engaged workforce. Productivity, how efficiently goods and services are produced, is the single most important determinant of a country’s per capita income over the longer term.2 Countries with high productivity have a superior standard of living. Unfortunately, this is an area where Canada has faced challenges. In 2012, Canada’s level of labour productivity (that is, the dollar value of output per hour worked) was USD$42, much lower than that of the United States, at USD$52.
More worrisome is that despite a broad and growing consensus that Canadian productivity needs to be improved, the gap with the U.S. is widening, not narrowing. Canada’s productivity level has fallen to 80 per cent of the U.S. level from a high of 90 per cent in the mid-1980s. Efforts to improve labour productivity are needed to sustain or improve Canada’s standard of living.
How does this relate to Canada’s health care systems? According to Statistics Canada, Canadian workers lost an average of 7.7 days from work in 2011 due to illness or disability.3 Direct and indirect costs of disease and injury in 2000 were estimated at around $188 billion,4 a figure that is likely to be higher now. Disease outbreaks are very costly too. The Severe Acute Respiratory Syndrome (SARS) drained billions of dollars from Canada’s economy in 2003. Because health care services touch the life of every Canadian, the sector plays a key role in decreasing employee absence due to illness, stress, and disability, which bring significant economic burden to Canada. Put simply, healthier workers are more productive workers.
Third, the health care sector is a major pillar of science and technology research. It also is a leader in putting the results of research to work. Advancements in life sciences have resulted in additional economic output of trillions of dollars that exceeds health research and health-care costs over the same period by orders of magnitude. For example, at the turn of the 20th century, an individual had a life expectancy of 50 years.
In 1961, the average Canadian could expect to live to age 71, and in 2006, the estimated average life expectancy in Canada was 80 years. This represents an impressive gain of 30 years of life over one century. These health gains represent the benefits of improvements in determinants of health (e.g., education, income) but also health advancements which were the product of research and innovation that was properly translated into health-care services. In the United States, 1970–2000 life expectancy gains have been estimated to be worth USD$95 trillion (USD$3.2 trillion per year).5 Further improvements in the treatment of cancer and cardiovascular diseases are estimated to bring additional value in the magnitude of billions of dollars to the United States.
A 2008 report from the United Kingdom also highlighted the value of advancements resulting from medical research.6 It found that public investments in cardiovascular research in the U.K.—conducted from 1975 to 1992—yielded returns of about 39 per cent. In other words, for each £1 invested in public cardiovascular research, the U.K. earned £0.39 per year in perpetuity.
This demonstrates that when health research and development leads to health innovations that are appropriately and timely integrated into health and health care systems, the result is healthier and longer lives, which creates more value than the investments they require. Combined with the shift over the past century from physical labour to knowledge work, this means that Canadians have the ability to remain in the labour force for longer and hence make a greater contribution to wealth creation as well as consumption. The returns on research, therefore, also contribute to productivity growth.
Despite its escalating costs, the health care sector may be creating more value than it consumes. It is no exaggeration to say that the Canadian health care system lies at the heart of Canada’s national economy and innovation system, both as a contributor of inputs and as an attractor or demander of its outputs.
Gabriela Prada is the director of health innovation, policy and evaluation for the Conference Board of Canada.
1 The Conference Board of Canada, The Economic Footprint of Health Care Delivery in Canada, 2013.
2 The Conference Board of Canada, How Canada Performs, Labour Productivity Growth.
3 Statistics Canada, Days lost per worker due to illness or disability, by sex, by province.
4 Public Health Agency of Canada. Investing in prevention. The economic perspective. Key findings from a survey of the recent evidence. 2009.
5 Kevin Murphy and Robert Topel, Measuring the Gains from Medical Research?An Economic Approach (Chicago: University of Chicago Press, 2003).
6 Brunel University Health Economics Research Group et al., Medical Research: What’s It Worth? Estimating the Economic Benefits From Medical Research in the U.K. [online]. (November 2008), [cited November 2009].
