The US infrastructure most in need of investment is human

Does caring for humans count as infrastructure? It’s a big debate in the US right now, in the wake of President Joe Biden’s $2.3tn American Jobs plan, which aims to repair the country’s crumbling roads and bridges and bolster its supply chains, but also to improve the health and childcare systems — if you can call the US’s paltry patchwork of coverage a “system”.

Under Biden’s plan, $400bn would be spent on home healthcare, mostly for the elderly. Another $25bn would go to support childcare. Nearly all Republicans, and some centrist Democrats, are worried about this expanded definition of infrastructure. Should “building back better” involve bolstering such services? I’d argue yes, and then some.

For starters, healthcare is where the jobs of the future are. Over the next decade, home health and personal care is predicted to grow faster than other job categories, according to the labour department. That’s due in part to ageing demographics, but also because so many other jobs are being automated.

Such tech-led job disruption will be painful for some, but it’s not inherently bad. Over the long term, based on historic experience, technology is a net job creator. But even in the short term, as economists Charles Goodhart and Manoj Pradhan argue in their book The Great Demographic Reversal, rich countries “will need all the automation that we can get in the rest of the economy in order to raise productivity adequately . . . [and] to compensate for that which will be lost to caring for the ageing population”.

Care jobs will be what’s left at the bottom end of the socio-economic spectrum. But, done well, they can release more productivity at the top. The McKinsey Global Institute estimates that better health outcomes could add $12tn to global GDP in 2040 — much of that from improving the productivity of existing workers who suffer from health issues or have care responsibilities.

Women in particular have much to gain from greater investment in the “care economy”. As Jay Powell, the US Federal Reserve chair, said recently, the US “used to lead the world in female labour force participation, a quarter-century ago, and we no longer do. It may just be that [our childcare] policies have put us behind.”

Women also took an extra hit during lockdown. They generally did a disproportionate share of the extra childcare and household work (don’t get me started on the mental health impact of that). They were also more likely to be laid off. As well as the $25bn in Biden’s infrastructure bill for upgrading child care centres, there is $39bn more for child minders in the Covid relief package. In an ideal world, this will expand and improve care jobs, and allow better educated women to fill higher productivity roles.

As with the $100bn earmarked for schools, such investments improve human capital. Increasingly, this is the only kind of capital that matters, as digital business simply doesn’t require as much physical capital as old economy companies. The US should also allow companies to write off investment in worker training and other investments in people, as they currently do with machinery. This is something that nearly every business and labour leader I know would support.

Done properly, investing more in the infrastructure of care could fuel innovation. The White House is concerned about supply chains partly because manufacturing generally fosters more innovation and productivity than other sectors. But as manufacturing continues to automate, it will never again create as many jobs as it once did, regardless of how supply chains are organised or if they reshore.

Could the caring economy fill that employment void? Experts such as Harvard economist Gordon Hanson, who studies the interaction between labour markets and their location, say that in some places it could. “The areas that bounce back better tend to have good universities or healthcare complexes that can function as job engines,” says Hanson.

It may seem fanciful to imagine that a nursing home or child care centre could ever be an innovation hub in the same way as a big factory or R&D complex? Yet some already are.

Consider places like the Cleveland Clinic, a non-profit medical centre that integrates clinical and hospital care with research and education. The subject of a Harvard Business School case study, it has become a national and international job creator but also a hub of cutting edge innovation in areas like drug and device development, and medical procedures. This is in large part by leveraging big data, digital platforms and robotics, but also by working in a cross-disciplinary way inside and outside the clinic.

At the very least, investing more in health and education would boost the kind of social capital that characterises successful communities. We need much more of that right now, everywhere. Only 1.5 per cent of the World Bank’s concessional grants are for health, and only 1.9 per cent are for education.

In rich and poor countries alike, investment still focuses primarily on physical capital. It’s time to recognise that, perhaps more than any other form, human capital is the infrastructure of the 21st century.

rana.foroohar@ft.com