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Making yourself scarce: How relative scarcity affects veterinary incomes
Market data reveals which practitioners are in higher demand-and who's earning more money.
My brother called me excitedly and asked, “Do you want to go to the Travel and Outdoor Expo?”
My first thoughts were of previous expos we'd attended-fun days full of talking with other fishermen and hunters about boats, equipment and trips. Of course I would love to go, but I needed some actionable information: When was the expo, where would it take place and was there any specific reason we needed to attend this particular event?
My brother lives in California and I live in Chicago. Turns out the expo was in my neighborhood in just a couple of weeks. It would be the perfect opportunity to find a guide for a trip to Wisconsin to fish for Muskie, something my brother and I had talked about for years. I signed up.
So what's my point? That information is only as good as the outcomes it leads to. It's as true in the world of veterinary markets as it is in the world of outdoor expos. Specifically, information about veterinary incomes, debt levels, numbers of veterinarians by practice type, practice revenues, unemployment, underemployment and pricing is only useful if it is actionable.
Consider a new veterinarian's income and debt levels. Mean income reported prior to graduation by those veterinarians in the 28 U.S. veterinary colleges with full-time employment was $66,897 in 2014. But how many of those 1,121 seniors received that starting salary? If they didn't, what factors explain the difference?
The three most important factors affecting starting salary are gender, practice type and location. The mean starting salary for males in 2014 was $69,994 compared to $66,235 for females-more than a $3,700 difference. Equine practitioners received a mean starting salary of $42,077 compared to food animal practitioners, who received $73,354-more than a $31,000 difference. And new veterinarians who were set to begin practice in the mountain states (zip codes that begin with an 8) received a mean starting salary of $71,233, while those in the northern states (zip codes that begin with 5) received a mean starting salary of $63,718-a $7,500 difference.
These figures are signaling relative scarcity in the market for new veterinarians. Food animal veterinarians are relatively more scarce than equine, and veterinarians in general are relatively more scarce in mountain states than northern states. So what exactly does it mean to be relatively more scarce?
To help answer that question, let's look at some data collected by the U.S. Bureau of Labor Statistics (BLS), a series called Help Wanted Online. In this series, the BLS compares the number of online help wanted ads to the number of unemployed people in each occupation. According to a recent set of those comparisons (see Table 1), there are nearly six times as many jobs in computer and mathematical sciences as there are people looking for those jobs. However, in food-related employment, there are approximately seven people for every advertised job. Thus, employees in computer and mathematical sciences are relatively more scarce than employees in food-related industries.
The market signal of relative scarcity is wages. Professionals in computer and math occupations are being offered a mean starting wage of $39.43 per hour, while food workers are being offered a mean wage of $10.38 per hour. This is a clear signal that we need more computer and math people and fewer food workers-that computer and math people are relatively more scarce in America's labor market then food workers.
There is a clear relationship between relative scarcity and wage-generally, the more relatively scarce the workers, the higher the wage. In fact, more than 80 percent of the variation in wage rates can be explained by relative scarcity. What's more, we can rank relative scarcity from most scarce to least scarce by using the ratio of jobs available in an occupation to people in an occupation looking for work-a supply-and-demand ratio reflecting market conditions for this type of worker. Using this supply-demand ratio, we can build a relative scarcity curve to illustrate the relationship between relative scarcity and wage, as in Table 2.
So where do veterinarians fall on the relative scarcity curve? To determine that, we have to convert starting salaries to wages. A food animal veterinarian who makes $73,354 working 2,080 hours (40 hours per week) would be receiving a comparable wage of $35.27 per hour and be near the supply-demand ratio of 0.5. But if she worked 2,600 hours annually (50 hours per week), her wage would only be $28.21 per hour, closer to the supply-demand ratio of 1. A starting veterinarian who may be expected to work 60 hours per week is making $23.51 per hour, near the supply-demand ratio of 1.5.
As you can see, the number of hours worked annually affects the hourly wage rate and the position on the relative scarcity curve. The more hours the average new veterinarian works, the fewer new veterinarians will be needed to fill the job demand. The relative scarcity of new veterinarians will increase as new veterinarians work fewer hours on average.
Salaries and wages are price signals that help guide resources and ensure that the amount of supply is close to the amount of demand across all markets. However, there are many factors that influence those market prices. Even though the mean salary of a new physician may exceed that of new veterinarian, it does not necessarily imply that medical doctors are relatively more scarce than veterinarians. Indeed, there may be some new veterinarians that have higher starting salaries than some new physicians. The key is to pay attention to market prices (wages) and understand the factors that affect them. Higher wages generally mean greater relative scarcity and, based on the mean wage rate for new veterinarians, the measure of relative scarcity is between 0.5 and 1.5.
So what's the specific actionable for this information? It's that new veterinarians can use this information as a guide. With their high debt-to-income ratios, new veterinarians who target their early career to locations and practice types with higher relative scarcity will more quickly improve their economic well-being. As they develop greater economic security, these veterinarians can begin to develop a career path to reach the region and type of practice they desire.
Dr. Mike Dicks, director of the AVMA's Veterinary Economics Division, holds a doctorate in agricultural economics from the University of Missouri. He has worked in Africa on water delivery and energy production technologies and has served with the USDA's Economic Research Service.