This post is sponsored by the American Veterinary Medical Association.
Dr. Michael R. Dicks is the director of veterinary economics at the American Veterinary Medical Association (AVMA) and has, for the last three decades, advised groups around the world from the USDA to foreign governments on food and farm policy. Dr. Dicks sat down with us to discuss how the economics of the veterinary industry are changing and what the future holds.
Question: What is the role of economics in veterinary medicine?
Answer: The role of an economist is to define the problem, figure out strategies to address the problem and share potential consequences of those approaches. I want to give people information to help them make decisions; it’s not my role or the role of economics to make those decisions. In the veterinary field, the problem is excess capacity. Sources of this problem include the economy, prices, the increasing rate of new veterinary students and uneven distribution.
Q: What do veterinarians need to know about the marketplace today?
A: It’s really important that you understand the relationship between supply and demand if you’re concerned about outcomes in the market. In veterinary medicine there are three markets: the market for veterinary education, the market for veterinarians and the market for veterinary services. Those markets are independent while, at the same time, being vertically connected. The thing that links those three markets is price.
Q: What is the greatest influence on veterinary compensation?
A: The ability of each veterinarian to provide marketable services is the basis for compensation. The number one thing that affects compensation is the economy. When we went into recession, demand for services dropped. For new veterinarians, we think that the recession reduced compensation by up to $11,000 per year. What’s really driving compensation is the amount of marketable services veterinarians are able to provide during a workday.
Q: How have the supply of veterinarians and demand for their services evolved in the last decade, and where is the market going in the next 10 years?
A: As the population grows, there will be more people with pets. Changed attitudes toward pets have increased the demand for veterinary services. Unfortunately, the demand is income-elastic, so as incomes go down, demand goes down. We just went through one of those periods and haven’t fully recovered. If demand doesn’t recover and veterinarians don’t find a way to increase revenue without increasing price, then you’re looking at a collapse in the veterinary education market.
Q: How will attending the AVMA Economic Summit prepare practice owners and other business-minded veterinarians to not only work more effectively within the market but also to lead the market?
A: Veterinarians need to know about supply and demand and the factors that affect them – how markets work and what drives the markets. There’s not a lot we can do about consumer income, but we know that preferences and price have something to do with demand and we can adjust those. If a market isn’t working as well as it could, let’s figure out why and fix it.
Get more information from AVMA’s Exploring Veterinary Economics series of articles addressing a variety of economic issues facing the veterinary profession.