From China to the US, spending on healthcare, housing and education must rise
- Ageing societies and the pandemic-induced shock to the medical system will drive spending to address capacity shortfalls and improve long-term care services
- Meanwhile, a growing middle-class population and the rising cost of living call for greater spending on affordable housing and education
An important component of infrastructure-spending proposals relates to the upgrading of medical infrastructure. A key reason for this is the uptick in old-age dependency ratios. The effects of a growing “silver generation” and falling fertility rates mean the proportion of old-age population relative to the working-age population has increased significantly.
Despite this, healthcare-related spending has risen at a modest pace. China’s spending on healthcare as a percentage of its gross domestic product rose just 0.4 per cent, while in the US it rose by a mere 0.2 per cent.
Most recently, however, the outbreak of Covid-19 has exposed the fragility and lack of capacity in existing medical systems and supply chains, highlighting the urgent need for greater investment in medical infrastructure. With only 2.9 hospital beds per 1,000 people globally as of 2017, this lack of capacity could pose long-term systemic risks and potentially crowd out vital healthcare services if left unaddressed.
The digitalisation of the medical space will be carried forward by the ubiquity of mobile phone users. China has more than 1.6 billion mobile phone subscribers, around 298 million of whom already use health-related apps and services.
The long-term structural shift towards an ageing society and the pandemic-induced shock to the medical system will demand further spending to address medical capacity shortfalls and improve the affordability and accessibility of long-term care services.
Addressing the need for more affordable housing will be critical to maintaining sustainable socioeconomic growth. There is also a pressing need for greater investment in childcare and education-related infrastructure. In the US, households where both parents work full time are on the rise, up from 30 per cent in the 1980s to just under 50 per cent in 2021.
This increases the need for day care centres in convenient locations for families as well as transport upgrades to help optimise commute times. A larger middle-class population will also demand a more robust educational environment for their children, equipped with digital infrastructure and equipment like those used in modern society.
Building and upgrading the infrastructure needed to support affordable healthcare, housing and education in a timely manner will be essential to avoid further deepening social inequality and growing government budget deficits in the future.
Marcella Chow is a global market strategist at J.P. Morgan Asset Management