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Home Publications Blogs Beat the Press Why Is the NYT Editorial Board So Protectionist When It Comes to Doctors?

Why Is the NYT Editorial Board So Protectionist When It Comes to Doctors?

Sunday, 20 July 2014 04:43

Most economists agree that trade is one of the main reasons that less-educated workers have seen a decline in their relative wages over the last three decades. The story is pretty straightforward. Trade policy has been designed to put manufacturing workers in the United States in direct competition with workers in developing countries like Mexico or China, who sometimes earn less than $1 an hour. This causes many workers in the United States to lose their job and puts serious downward pressure on the wages of workers who manage to keep their jobs.

Given this fact, it is striking that trade, or more precisely allowing more foreign doctors to practice in the United States, does not even rate mention in a NYT editorial on a prospective doctor shortage. Doctors in other wealthy countries get paid on average about half of what they get in the United States. Doctors in developing countries get paid even less. This suggests the possibility of enormous gains from allowing more foreign doctors into the country to bring wages of physicians here in line with those in other wealthy countries. (We could easily compensate developing countries for losing doctors by providing them with the money to educate two or three doctors for every one that comes here -- please think about that one for a minute before writing a silly complaint about brain drain.)  

Anyhow, it striking that the class bias in trade policy is so extreme that any policy that is designed to provide even limited protection for less-educated workers, such as the temporary tariffs on imported steel that President Bush imposed in 2002, are immediately denounced as protectionist by all right-thinking people. Yet trade can not even be discussed, even when there is potential for enormous gains, if the losers would be highly-educated professionals like doctors.

Comments (14)Add Comment
Doctors don't give a toss about patients.
written by Ralph Musgrave, July 20, 2014 5:32

Good points by Dean. Doctors in the old USSR used to get the same pay as truck drivers, and there was no shortage of people wanting to train as doctors. After all, if you’ve got a brain, it’s probably a more pleasant job than driving a truck.

Doctors are primarily interested in money, not in curing patients. I've no objection to the profit motive. But I do object to people claiming their job is a "vocation" and that they're motivated by altruism when in fact they're after money.
Why Sock Puppets Can't Talk About Price and Doctor Shortages at the Same Time
written by Last Mover, July 20, 2014 8:36

The NYT editorial cites various sources of shortages, to its credit even residency slots and difference between too many specialists and not enough primary care docs. It speculates shortages may arise from doctors in the wrong places and moving them around as a correction.

But like most articles on "shortages" it never cites doctor pay itself to support the assertion. Yet a shortage means by definition pay is not enough to clear the market. So the clear economic message implied is if anything, doctor pay is too low, not too high - not high enough (to correct the shortage).

It confirms Dean Baker's point on how willingly sock puppet media is ready to pounce on the slightest trade protectionist restriction of middle and lower class labor income from competition, yet report on selected overpaid white collar occupations as if such protection and trade restriction is obviously deserved and beyond question.

If mainstream media itself was competitive and not controlled by the economic predators who own it, "shortages" and "surpluses" could be reported consistently across all classes of labor and capital along with the prices/wages that drive them.

This is essential because the concept of shortage/surplus is directly related to the concept of non-competitive monopoly profit as economic rent that adds no value to the economy.

For example when economic rent is a large part of a doctor's pay presented falsely by media as a legitimate "shortage", the rent component conveniently disappears. At a minimum correcting such "shortages" with more residency slots for example, would never mean enough slots to actually cause pay to decline from competition that eroded those rents.

Yet for blue collar manufacturing workers and the owners of domestic steel production for whom Bush was advancing temporary tariff protection, the notion that any of that however small, constituted undeserved economic rent was unacceptable and immediately shot down. How dare they think of themselves as doctors.

The tariff on steel was portrayed to create an "artificial shortage" on foreign steel that raised its price to domestic buyers of steel, forcing them to purchase steel at a higher average price from both sources.

It was shot down because in this case, buyers of steel trounced sellers of steel to prevail, as worthy doctors who prevail as well. (Bush misunderestimated the power of the rent-seeking class that shifted from sellers to buyers of steel.)

If the media presented "doctor shortages" the same way it presented "steel shortages", doctor pay levels would be front and center like steel prices are - the price is too high, artificially set to restrain trade through suppressed competition and maintain the collection of economic rent.

This is in sharp contrast to those in the 99% expected to compete for a living in head-to-head price competition that drives economic rent to zero. But don't worry, it's all about prices that correct shortages and surpluses of steel as well as doctors isn't it. After all the goal is economic efficiency.
@Ralph: All generalizations are false.
written by Another Scott, July 20, 2014 9:31
Hey Ralph - pretty broad brush there. :-/

I think many of the comments (but not all) at the NYTimes make better points than the Editorial did. And Dean's point that "competition for thee but not for me" certainly applies as well.

If someone wants to get rich, the way to do it generally isn't by going to medical school (especially these days - see the comments). Business and being higher-up the food chain (where you can collect high rents from those with money) is the way to get rich, and it takes much less investment in education and training than medicine.

The medical system in the US is broken in many, many ways. Increased supply of GPs from abroad is part of a comprehensive solution, but it's not a panacea. Cutting physician salaries without changes in the rest of the system (insurance reimbursements, hours, residency slots and requirements, regulations on what nurses/NPs can and cannot do, etc.) will dramatically change the system in ways that can be predicted not to be less than optimal.

Cui bono? Or, follow the incentives and the money.

We're lucky in that we've got a GP who takes his time and doesn't run an assembly line. It's rare. He's certainly not in it for the money, Ralph.

My $0.02.

@Another Scott - edit...
written by Another Scott, July 20, 2014 9:42
"...can be predicted not to be less than optimal." should be "... can be predicted to be less than optimal." Or, IOW, bad.

@ Another Scott
written by Larry Signor, July 20, 2014 10:32
"If someone wants to get rich, the way to do it generally isn't by going to medical school...".

Better check the data. Minimum physician compensation in 2013 was $174,000.00, putting the lowest compensated physicians solidly in the top 10% of earners [with the majority in the top 5%]. I also see no reason a declining reimbursement to physicians due to an increase in supply of physicians would necessarily lead to sub-optimal results. This would be a normal free market response.

@Larry - Devil's in the details. Don't believe the "averages".
written by Another Scott, July 20, 2014 10:46
Your linky says "Earnings are for full-time work only. They include salary, bonus, and profit-sharing contributions."

Lots of people doing medical work don't fit in those categories.

E.g. an opening in the VA in West Palm Beach in Florida - https://www.usajobs.gov/GetJob/ViewDetails/375157600 24 hours a week.

Interns and residents, who do lots of the real work, make a lot less than $100k a year. See healthcare-salaries.com

My background is in electrical engineering. There are similar stories about "shortages" and high salaries in the press. That doesn't mean that lots of qualified people can't find jobs that pay anything close to what they were led to believe based on the "averages" and "shortages".


Are doctor's salaries the problem?
written by Dave, July 20, 2014 11:28
Physician's salaries are roughly 1.5% of GDP. We spend roughly 16% of GDP on medical care. Other nations spend half that with better results.

Let's say you could reduce the costs from 16% of GDP to 15.25% of GDP by making physician's lives just as miserable as manufacturing worker's lives. How much good would this do?

Pareto would not like this argument to lower doctor's salaries to fight medical costs.

Drugs, medical devices, patents, CEO salaries, insurance rents, these are where the money is.
written by skeptonomist, July 20, 2014 1:31
OK, I thought about paying other countries and arrived at this: if we would pay the cost of educating three doctors in foreign countries to get one, why wouldn't we pay that much in this country and get three here - or even just one? Why get involved in paying other countries if the problem is that not enough doctors are getting through the system here? It might be easy for Dean to set up a payment system if he were dictator, but in the real world this has to be done by Congress, which is reluctant to send money to other countries for other than military purposes.

And again, why is physician compensation in the other advanced countries so much lower - is it because they are importing doctors from the third world, or that they have a "free market" system that we don't? Why should the US get into an untested system of imposing the "free market" on physicians by paying other countries - or just stealing them without compensation - when so many other countries are succeeding in keeping costs low by other methods? The "market" in physicians is different from that in say, farm workers, because of the societal investment in training among other things.

Actually the compensation of physicians does not really go according to supply and demand - basically those in private practice are able to charge whatever they want - or what is customary - and in a different way that applies to hospitals and HMO's. This is not a segment of the economy in which there is real free-market competition. People don't shop around for doctors or hospitals based on price. Solutions to the high cost of health care probably won't be found until this is realized.
Training doctors is a big expense for poor countries
written by John Quick, July 20, 2014 5:13
We could easily compensate developing countries for losing doctors by providing them with the money to educate two or three doctors for every one that comes here

Until that happens, objections to brain drain are not silly.
Is consistency always good?
written by Dave, July 20, 2014 5:43
The essence of the argument here is that we should have consistency in how we treat doctors vs. manual labor. To demand consistency in this direction implies agreement with how manual labor is treated. This is my disagreement. Two wrongs don't make a right.

If we want consistency, let's start by treating manual labor with more dignity. But using trade in a way that backfires by destroying entire fields is not a good answer.

If doctor's salaries are too high, why can't we create more medical schools and train more students? I suspect two reasons: 1) school is hard and 2) school is expensive.

Trade with poor countries doesn't address anything directly. It address everything indirectly in in ways that backfire against the middle class and the poor. Why would it work better if we did it to doctors?
written by Tim, July 20, 2014 8:16
Dave, doctors make more money precisely because they belong to organizations that are well-connected enough to limit market competition. These organizations (ADA, AMA) are powerful enough to pass legislation limiting med/dental school admissions and credentials. These are not market-based interventions and thus have the effect of constraining supply. US-based trade unions haven't been effective at keeping manufacturers from going overseas for cheap labor.
Secondly, more doctors/dentists practicing in the US lowers the price of the bill for poor and working people. I don't see how this has a "backfire" effect.
Hmm. Tough grading on the comments in this thread. :-/
written by Another Scott, July 20, 2014 8:27
The minus votes on the comments are surprising. I don't suppose those who did so would be willing to say why?

written by dax, July 21, 2014 6:27
"We could easily compensate developing countries for losing doctors by providing them with the money to educate two or three doctors for every one that comes here -- please think about that one for a minute before writing a silly complaint about brain drain."

OK, but this strikes me a bit like the argument of the free traders, "We could easily compensate the losers of free trade with the gains of those who have benefited, so everyone wins." Yes, we could. But we won't. And we never will.
written by Dave, July 21, 2014 10:18
This is a complex subject that could go on for a very long time. I know several physicians and some who tried and failed. I have one remote family member who was repeatedly rejected for US medical school, so he decided to go to school overseas. It turns out he was rejected for good reason: he didn't have what it takes. He failed there too. Tough admissions helps to ensure that the doctors that make it through are talented and work hard. Those are good things. But this is all relative, and this alone could consume pages of discussion.

How do these things backfire? They already have! We've had a supposed shortage of STEM workers CAUSED by overseas competition. Nobody wants to go into these fields anymore unless they have a pure love for the work, because the conditions are awful. The quality of work getting done overseas is horrendous, but it is cheap enough that they can compensate by redoing it over and over for the same price as doing it here the right way the first time. While this is ok for some fields, in medicine it can be fatal.

Pursuing activist policies to drive down wages will ruin the field. How? Few citizens of the US will enter the field. The big business CEOs have already ruined a large portion of the industry, driving people away right now. As soon as they get past the groups that prevent them from taking advantage of cheap, overseas education, the US medical industry will implode, taking research with it.

This is a recipe for disaster.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.