Mike Dicks

commented on AVMA-IHS US Veterinary Workforce Study 2013-05-21 09:36:42 -0400 · Flag
Carl, this is the type of discussion I had hoped that the veterinary profession would entertain. Many of your statements get to the heart of the matter of excess capacity and I will respond to them one at a time.

From my review of the past veterinary workforce literature I would suggest that the first real sign of trouble came from the Wise and Kushman study. For the eight year period prior to this study the rate of growth in the supply of veterinarians was 3.9% per year and exceeded the growth in demand. Based on these numbers, the Wise and Kushman study forecast a supply-demand imbalance growing in the decade ahead. Following this study there was no increase in the rate of increase of veterinarians for 2 decades, while demand continued to increase. The best data available would suggest that during this 2 decade period demand grew faster than supply. Then in the late 1990s the profession receives conflicting signals from the KMPG study and studies indicating the shortage of rural/food animal veterinarians and public health veterinarians. Most of the studies like the KMPG study talked of an oversupply of veterinarians, but failing to present any evidence of unemployment did not support the claim of an oversupply. To be clear, there was no evidence of veterinarian unemployment because there was simply no data collected, not because it did or did not exist. But this important piece of data was not collected until the current workforce study. But, excess capacity may have already been a problem in some veterinary practices, unfortunately it wasn’t measured and in fact the KMPG study noted that excess capacity in practices (underemployment) was a result of “indivisibility” of labor, but was not actually measured in the study. The focus of the workforce study on excess capacity, a concept that looks at both oversupply and underutilized resources, is the first study to definitively describe the problem or “too many veterinarians”. While unemployment may be low (indicating no supply-demand imbalance), excess capacity in practice (underemployment) exists and indicates that veterinarians are moving into the profession and dividing up in smaller pieces a slower growing demand.

AVMA can talk about supply, provided there is data to talk about. The data on veterinarians entering the workforce is incomplete and the data on veterinarians leaving the workforce is almost nonexistent. We need better data here. We definitely need a better measure for unemployment.
The role of the AVMA economics division is to influence all decisions through the deliverance of unbiased information. As we continue to collect and analyze data the division will provide alternative strategies and the consequences of each on all entities in the profession. The WAG recommendations include a request for research on both the supply and demand sides.

Currently, the workforce model indicates that demand (across the board) would need to increase by 14% to eliminate excess capacity. Unfortunately we currently do not know the income or price elasticity of demand for any veterinary services. But, this is a top priority of the division and hopefully by this time next year we can provide that information (if veterinarians will provide the data needed). In the articles that I am now posting on AVMAs web, I discuss current trends in the output and prices of veterinary services relative to other service industries and other health professions. This is important information to the profession. However, we need to understand the price and income elasticities for various veterinary services as they are likely different. For one service you may be able to increase price and reduce the number of services to increase profit, while for another service lowering price and increasing the number of services may increase profit. Different services will have different price and income elasticities. In general, as the economy improves, disposable incomes will improve and the demand for veterinary services will improve.

The Brakke did not show that price was not a factor in the selection of a veterinarian. The study ranked reasons it did not measure the impact of raising or lowering prices for specific services within a practice. Increasing prices because the study was interpreted to indicate that price was unimportant may have produced adverse consequences. The customer’s level of disposable income and the price of the service are certainly important factors in the customer’s willingness to consume a service. But knowing this falls short of the knowledge necessary to make pricing decisions. To do that, we must know the exact effect of price and income on the demand for each type of veterinary service.
Finally, my comment that veterinarians focus on demand should not be trivialized. Certainly, those responsible for the supply of veterinarians now have the information about the state of the profession. Individual veterinarians can do little about the supply but they can affect demand and their own internal finances. As an economist, in an association of veterinarians, working on the demand side would appear to be the prudent place to begin. And, the success of this effort will depend largely on those veterinarians that I serve.