Davos Agenda

Care economy: The major economic crisis US business and government leaders are ignoring

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The labour shortage and economic risks to the care economy are too great to ignore. Image: Unsplash/Matheus FerraroClose

Sharon Marcil
Regional Chair, North America, Boston Consulting Group (BCG)
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Davos Agenda

This article is part of: World Economic Forum Annual Meeting

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  • The $6 trillion US care economy comprises both paid and unpaid services provided to populations who are unable to independently support themselves.
  • With historic labour shortages and economic challenges, US growth is at risk unless business and government leaders address the growing care crisis.
  • Creating more caregiver-centric employee experiences around caregiving is key to building business resilience and achieving post-COVID economic growth.

Each and every citizen can easily paint a picture of a parent or caretaker struggling to calm an upset child, or even a nurse helping an elderly patient manoeuvre through daily tasks.

These are commonly accepted aspects of daily life, but what often goes unaddressed is the emotional burden of this necessary role – how some people have had to abandon careers and schooling to provide care for their loved ones, while others depart the industry entirely because of low wages and long hours.

Now take those examples and multiply them by millions, for each job impacted, and the result is the $6 trillion care economy currently at risk of collapsing within the United States.

Comprising both paid and unpaid services, the care economy represents a sector of those who are responsible for providing care services to populations unable to independently support themselves, totalling roughly a quarter of the US gross domestic product (GDP) as of 2022.

Given historic labour shortages and compounding economic challenges in the wake of the COVID-19 pandemic, a massive chunk of US growth is at risk unless business and government leaders come together to address the crisis at hand.

The US care economy today

According to BCG research, if the care economy continues to operate without improvement, the US stands to lose $290 billion in GDP in the year 2030 and beyond, which is equal to the total GDP of the US state of Connecticut.

Yet, that is just the mid-range scenario. Extreme forecasts put the GDP loss at about $500 billion in the year 2030, highlighting how the stakes are too high for leaders to not address this growing problem.

Economic losses from the US care crisis: Three projections for 2030 and beyond
Economic losses from the US care crisis: Three projections for 2030 and beyond Image: BCG

This insurmountable loss can be attributed to a few key aspects:

  • Paid care workers leaving the workforce due to low wages, leaving behind unfilled jobs. According to BCG research, the number of vacant care jobs is at 1.8 million, representing nearly 10% of the 11 million vacant jobs referenced in the Jobs Report leveraged for this data set.
  • Unpaid care workers leaving their own jobs to backfill care that would have otherwise been provided by an aforementioned paid care worker. For every 10 paid caregivers who leave the workforce, one person in another part of the economy is forced to leave the workforce to backfill as a result.

Implementing strong business practices

The companies most likely to weather any economic headwinds are those that embrace data-driven, employee-first policies. With speculation of a financial recession dominating the headlines, there is mounting pressure on executives to demonstrate how resilient their business models are. Strong employee-first policies enable leaders to showcase the benefits of investing in their workforce.

Employee well-being is, and should be, one of the top priorities for organizations transforming their operating strategies to be more resilient. As the workforce continues to rebound from COVID-19 and to adopt hybrid working models, employers need to be more flexible for those who are also providing care services to their families and professionally.

In the same BCG survey, working parents reported spending, on average, 30 hours a week on unpaid caregiving in addition to their full-time jobs. Adopting employee-first policies would address these critical gaps.

Working full-time and caregiving in the US: How time is spent
Working full-time and caregiving in the US: How time is spent Image: BCG

On the heels of the ‘Great Resignation’, these workers are going to favour companies who can provide certain policies and benefits to help offset the burden of providing care, specifically:

  • Flexible work policies to cover remote and part-time work and more predictable work schedules, helping employees forecast and solve long-term care needs.
  • Increased paid family leave, which has declined dramatically in the wake of the pandemic – nearly 18% for maternity leave and 17% for paternity leave.
  • Subsidized options for paid care including financial assistance, back up care, or even on-site offerings for children.
  • Support for caregiver-centric policies under scrutiny at the federal and state levels.

All sectors must tackle US care crisis

As influential as businesses are in moving the needle on the care crisis, this issue is too large for one sector to tackle alone. Partnership with the public sector is a major component of addressing the potential GDP loss.

To start, the US is the only Organisation for Economic Co-operation and Development (OECD) country without national paid leave policies. Paid leave enables caregivers to take the necessary time to support loved ones without experiencing major quality of life changes triggered by a dramatic decrease in household financial support.

Additionally, childcare via subsidized or universal programmes provides access to quality childcare support – and has already demonstrated clear benefits for states and districts, such as Washington, DC, where universal pre-kindergarten care has shown to increase maternal labour-force participation by 10 percentage points.

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When it comes to the paid portion of the care economy, higher wages can ensure that jobs are seen as more attractive and valued by potential workers. Implementing higher wages can broaden the talent pool, but without proper training and recruitment measures, the pool is unsustainable.

It is important that public-funded care facilities implement proper training practices and leverage technology solutions and emerging innovations to ensure that caretakers can work more efficiently and relieve the more difficult aspects of the jobs.

In the absence of such options, data showed an increase in those leaving the workforce to become full-time caregivers, as well as caregivers leaving the workforce.

Technology can help innovate care

In addition to the aforementioned steps that the private and public sectors can take to address this crisis, technology will continue to be a massive proponent of innovation when leveraged properly. While major advancements have been made in autonomous aspects using technology, that is not what this article aims to suggest.

Where technology can be most useful is through the implementation of data to better empower caregivers and provide a more streamlined experience, be it in the paid or unpaid sector.

For example, virtual in-home care agents such as Sensi.AI can leverage artificial intelligence (AI), to better inform of a crisis, activating the caregiver in a more timely manner when the impact can be dire in a mere matter of seconds.

Discover

What is the World Economic Forum doing about healthcare value and spending?

When woven into the fabric of an industry, technology often helps positive change and transformation.

For the care economy, it ensures a more resilient framework that can withstand generational changes and labour shortages to come.

It is easy to lose sight of a crisis of this nature as the global community continues to drive forward net-zero initiatives.

However, for leaders in the US, in order to demonstrate resiliency in all facets of their respective businesses, it is imperative that they redirect funding towards a more caregiver-centric employee experience. The risks to the care economy are too great to ignore.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

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Davos AgendaFairer EconomiesHealth and Healthcare
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