Thinking Like an Economist: The Market for Veterinarians
NPR reports today that
There are way more veterinarians than there is work for them to do, according to a recent survey by the American Veterinary Medical Association, as the nation's veterinary schools continue to crank out graduates.
A estimates the supply exceeds the demand by the equivalent of 11,250 full-time vets...The veterinary workforce study predicts supply will exceed demand at least through 2025.And what does an economist immediately ask? If there's a surplus of veterinarians, what would we expect to happen to the earnings of vets? This is, frankly, something that intro econ students should get right--incomes of vets should be falling. Yet the NPR story provides no information about the earnings of vets, which makes it difficult to assess the validity of the AVMA survey. So I did exactly what you would expect an economist to do--I looked for data, and the relevant data was remarkably hard to find. I found median earnings for 2010 and for 2012 ($82,040 and $84,460, respectively). Adjusted for inflation, the median earnings of vets fell by 2.38% between 2010 and 2013. So there's some initial evidence that, in fact, the market has been reacting to a surplus of vets.
But the level of employment also matters. According to the Statistical Abstract of the United States (Table 616), 73,000 people worked as veterinarians in 2010, while the Occupational Outlook Handbook says 61,400 people worked as vets in 2010. The Bureau of Labor Statistics Occupational Employment Statistics database reports 56,020 vets employed in 2012, which makes the OOH estimaye of 61,400 look more reasonable. So employment appears to have declined by about 10.2% in a two-year period.
This is certainly consistent with a decline in the demand for veterinarians, which we would expect to result in a decline in the earnings of vets. But the implied supply elasticity is extraordinarily large. The supply elasticity is the percentage change in employment (-10.2%) divided by the percentage change in earnings (-2.38%), or 4.3. We generally thing that labor supply elasticities in the short run (and two years is a short time for this market to adjust) are fairly small, especially in occupations that require substantial investments in skill acquisition. The easiest explanation of this is that the market is not in equilibrium, that earnings remain above the level required to equate quantity demanded and quantity supplies--that there is a large amount of unemployment among vets. Unfortunately, finding data about occupational unemployment is difficult.
I'll admit that I started this investigation somewhat skeptical of the results of the AVMA survey. But it does seem to be reasonable valid. And another survey--also by the AVMA--suggests that earnings of veterinariand have been declining since 2007. But from where I started--with an article asserting that there is a surplus of veterinarians--to where I would up took a little time and a little effort. Assertions about surpluses (or shortages) are also assertions about price changes, and having that price information is essential to determining whether a shortage or a surplus in fact exists.