Benjamin Brown, MD, author of a book about the US medical system called Informed Consent, has a website entitled The Deceptive Income of Physicians in which he argues that physicians really aren't paid much more an hour than teachers. While I don't agree with all of his assumptions, I think his basic points are valid.
His argument basically goes like this. A teacher spends four years in school, then begins earning a salary with a nice set of benefits, working about 9 months a year. After retirement in 20-30 years, the teacher has a nice pension. The physician on the other hand, spends 8 years in school, the last four years of which are extremely expensive and time consuming. Then the physician trains for 3-6 more years at a rate of less than $10 an hour. Following this, the doctor makes a nice salary, but a large portion of it is consumed by taxes and debt repayment. He has to purchase his own benefits, and fund his own pension out of that salary. In residency, the doctor essentially works two jobs, then after residency, about a job and a half (60 hours/week). When you add it all together, they both make about $30 an hour. (According to his calculations and assumptions, a dentist makes about twice that, thanks to a shorter period of training.)
What I love about his arguments is that he points out to the general public that the loss of 10 years of income at the beginning of a career is a huge detriment to total earnings. It is also quite eye-opening to somehow who doesn't understand just how progressive our income tax system is to realize just how much a doctor pays in taxes. The other major factor, of course, is the skyrocketing cost of higher education, including medical school.
This is his basic formula:
I thought some of the assumptions he made in his calculations were a bit exaggerated, however, so I thought it would be an interesting calculation to run the numbers for myself and my career. I expect my overall hourly wage won't be quite as low as the internist for which he ran the numbers given that I don't work that many hours, but it should be an interesting exercise.
Net annual income: We'll use the average emergency physician income from a recent survey of $250,000. Since I would put about $50K into a retirement plan, and I'm married with children, my federal, state, and payroll taxes on $250K would be about $73,200. (You can use this cool IRS calculator to help figure this out). Let's subtract out about $15,000 for malpractice and another $15,000 for the benefits package I'll be buying myself, So let's say net income is $146,800.
Years worked: Let's say 22 years post-residency, as that is when I expect to be able to retire
Residency Income: Let's say $120,000, which was about what mine was
Student Debt: I didn't have any due to taking a military scholarship, but that came at a cost of an income significantly less than the average emergency physician for four years. The difference in income was about $130K/year x 4 years, so $520,000. We'll subtract say 25% of that for taxes, leaving $390K. And the military did pay for medical school and fees, about $20,000 a year, and provide me with a stipend of about $12,000 a year, so we'll subtract that as well. Since there is a certain time value of money, we'll add on a factor for that, say another $50,000 as a rough estimate. That'll leave me with a debt of $212,000, which I'll consider to be at 0% and paid off over just 4 years.
Average hours worked per week: I work about 33 on average.
Weeks worked per year: Given that I don't work any fewer shifts when I take vacation (just squish the monthly shift count into fewer weeks), I essentially work 52 weeks a year, at an average of 33 hours per week.
Years worked: Again we'll use 22.
Hours training: He used 34,000 hours for his internal medicine physician. As a resident, I worked 60-65 hours a week for half my residency, and about 80 for the other half, and had a month off each year. So we'll say 70 hours a week for 48 weeks x 3 years for a total of 10080. I think I probably spent about 40 hours a week, 8 months a year for four years in undergraduate, so 5120 hours there. I probably spent 40 hours a week as a medical student for two years 11 months a year. Then an average of 60 hours a week for two years for about 11 months. So medical school gives me another 8800 hours. So total hours in training for me was about 24,000.
So, doing the math, my adjusted net career hourly wage would be $50.81. Not quite as dire as Dr. Brown suggests, but emergency docs also have some of the highest hourly (not total, which is about average) pay in all of medicine. If I worked another 10 years, that would increase to $58.36 an hour. But you can quickly see how some physicians could easily have a figure less than that of a teacher (which he calculates out at $30 an hour). Consider a relatively poorly paid pediatric subspecialist such as a pediatric endocrinologist who spends 14 years in college, med school, residency, and fellowship and only earns $130,000 a year. Imagine also that he went to an expensive medical school and graduated with say $320,000 in debt. Not unheard of these days. A few quick assumptions bring me to a figure of about $23 an hour. Wow! Sobering isn't it.
These figures illustrate the importance of not living an upper class lifestyle. Physicians these days are decidedly middle class, so if you spend as though you are not, you're destined to never reach financial success. Don't get me wrong, I fully belief that most if not all middle class earners can retire early as millionaires with frugal living and a wise investing plan. But don't assume that having a couple of letters after your name will get you there automatically. You're going to have to scrimp, save, and invest like everyone else if you want a comfortable retirement someday.
Do you think physician income is deceptively high? Or do you think Doctor Brown has skewed his analysis? Comment below!
Wow, where did you do residency at? Your residency income was almost triple what mine was. I did not know that ER had such a good lifestyle. Maybe I should have considered that specialty more when I was in medical school. I work around 50-60 hours as an anesthesiologist. Anyways, I’m going to run my numbers through that net hourly calculator to see what my hourly rate is. Frugality and living a lifestyle well within your means is definitely the way to go. (We’ve made it a point not to keep up with the houses, cars, furnishings, jewelries of the other docs we work with) We are more interested in the earlier attainment of financial freedom.
The 120K is a three year total for residency. Mine paid about $40K/year, which was about average at the time as I recall.
Lifestyle is what you make of it. I’m confident that there are plenty of anesthesiologists out there averaging less than 40 hours a week. I’ve had jobs where I was working more and I decided I didn’t like it. So when I went job hunting, I only looked at places where it was possible to work less. I don’t like 12 hour shifts, I don’t like working more than 14-17 days a month, and I can pare back my spending enough that I can meet my financial commitments and savings goals without having to do that. At a certain point another $50 or $100K isn’t going to make you any happier.
It’s interesting that you wish you’d looked at EM more closely in medical school. I sometimes find myself wondering why I didn’t consider anesthesia! Grass is always greener I guess…
you are doing a great job with your blog. I will say however that im not sure this is the kind of information we really want to push on the general public. It seems to me that most people will start to distrust us figuring we have some less than noble motive and even if they come to the conclusion that we are underpaid or paid appropriately, it isnt going to get us very far with any debate. As im sure you know, the average salary data isnt exactly great science and rarely do you see established physicians getting unemployment benefits or living in a shack so in this economy, im not sure a lot of people will have positive vibes towards us regardless of how many hours we worked to get to our current position. I love being a physician and although i have some concerns about the long term economics in our industry especially as it relates to our salaries, i wouldnt pick another career.
@Rex-
I agree. The general public will never think docs are underpaid no matter how little they make. But it is an interesting way to look at our income (i.e. considering the cost and the number of hours in training) so I thought it was worth spotlighting with a blog post.
In the town I grew up in, I am told there are no private primary doctors who take medicare. My parents (who use Medicare as their primary and have a good insurer as the back-up) ended up in a sliding-scale clinic where the waiting rooms were full of uninsured, low-income folks because it was the only place in town taking new Medicare patients. As patients start losing access to care they’ll realize that at a certain level of reimbursement many doctors will choose to do something besides seeing patients. None of us are stupid and if forced to, we could find another line of work to provide similar income and do medicine as a side hobby at a free clinic. The level of income at which each doctor would choose to do that varies, and I’m sure there are some of us that would practice medicine even for $25,000 a year, but I doubt most of us would. Many of the recent graduates simply couldn’t afford to do that given their loans.
i dont think we are ever going to get to the point that we make only 25k per year and although i agree some might see less patients with whatever reduction is coming, it isnt likely most of us would go back to school. we might work for industry or something along those lines. while i really like your work on this site, im not so sure the 250k for ER is really an accurate number. I know you didnt just make it up out of thin air but we both know those numbers arent likely accurate. Were u ever stationed at BAMC or WHMC between 2000-2008?
The $250K comes from the 2010 Medscape Salary Survey. It is an average with the limitations that go along with that. What other figure to use other than my actual salary from last year or my expected salary for next year?
Never stationed in San Antonio.
i understand but you of course realize that has a small sample size and extreme bias of who responds (and why). I personally believe most of us who make more money dont want the actual numbers listed or want to feel some of the income “isnt salary”. frankly do you actually have any fully time friends making less than 250k? If it is the average there should be some. i dont have any ER friends in that boat. Personally im in a field that likely makes more than ER and thus i dont begrudge your field or any field for what they make. id love to see a forum/blog on garbage scams that is tried against us and why they are garbage.
My salary for the first four years of my post-residency career was less than $130K. Most-prepartner positions also pay less than $250K. Many employee positions pay less than that. Partners who don’t work full-time also often make less than that. That’s why it is average.
The same average was found in the Daniel Sterns survey from 2010. So yes, I do believe it is average. That still allows for half of emergency docs to make more, potentially much more.
I have lots of posts planned about the frequent scams/bad deals we see.
come on now…
that was bc you were in the military and i wouldnt be surprised if you did some moonlighting to augment that number since that is easier to do in ER than other fields. now i do agree we should count all folks including academics etc but we should only include full time positions and those positions are not the majority. Bottom line is i dont want to argue too much on this point and glad you feel it is an accurate number (although i honestly dont) but i do think we should be careful not to mislead the conversation. I hate it when the financially people use deceptive tactics, so i dont want us doing that either.
Yes, add another $20K for moonlighting. The fact remains that many emergency physicians are in positions where they earn less than $250K. Military, VA, small towns (esp non-board certified), part-time, academics, pre-partners (including myself this year)…..
I’m not sure I buy your argument that the majority of doctors underreport their income on anonymous surveys. 140 hours per month for 12 months divided into $250K is $150/hour. That’s basically the going rate for moonlighters/employees in the areas of the country I have worked in. It sounds like you and those you work around have got a better gig going. Good for you.
You say 40 hrs /wk as a medical student. Is that only lecture/lab time or does that also include study time? For instance, my first semester we were in school for pretty much as long as a typical working day, however the additional study time that we needed to put in during the evenings and on weekends would far surpass the 40 hr/wk.
Depends on the school and the student. I had lots of classmates that studied until midnight every night of the week whether they needed to or not. As a general rule, I spent 40 hours a week on medical school for the first two years. That’s why I used 40. Some schools have close to 40 hours a week just in lectures and labs, so a student who actually went to all that class would probably have some significant additional study time above and beyond that. Not only did my school not have 40 hours a week of class, but I didn’t go to all they offered anyway.
The public in general think that the doctors are rich. Those calling for higher taxes on rich would be better off by asking for no or lower taxes on poor. Those who make $10,000/year pay taxes at tax/income ratio of 0.1 ( 10/10000)
whereas those that earn $350,000 pay at rate of tax/income ratio of 0.01(35/350000…the numbers are rounded off as an estimate).
If we raise the taxable income to $25,000 without changing anything else and move the tax bracket up, it is going to help middle class and poor. The middle class would pay income tax at lower rates and the poor would prefer to work rather than go for welfare programs. That is the problem with tea parties (most of who belong to middle class): they are calling for lower tax rates on rich instead of wanting lower tax rates on poor and middle class.
Sara-
Might I recommend the excellent non-partisan book on taxes called Taxing Ourselves.
Those who make $10K per year don’t pay federal income taxes at all. In fact, a typical married family of four doesn’t start paying any tax until around $45-50K. Tea partiers resent this fact. They think everyone ought to pay something in federal income tax, even if it is only $50-100 a year. That way they have some skin in the game.
A typical person making $350K per year would pay far more in federal income tax in total dollars AND as a percentage of income than someone making $10K per year. As such, I have a hard time following your tax/income ratio. The only portion of our tax system that is regressive is the social security tax, and I think that’s okay since the poor get far more benefit for their SS tax dollars than higher earners. The medicare tax is flat, and the federal income tax is quite progressive.
It isn’t the taxes the poor pay that keep them from working. It’s either A) They can’t get a job or B) they prefer being on welfare. Blaming it on their tax bill shows serious misunderstanding of our tax system in my opinion.
A family of 4 with lower middle to mid middle class income will NOT pay any SS or Medicare tax either because they have earned income credit and child tax credit. For example, a family of 4 with $25000 income will get about $6900 refund while their SS and MC taxes total $1912. They get net money of about $5000 without having to pay any federal income tax, SS or Medicare tax. Our tax system is truly progressive.
That $5K will cover any state income taxes, sales taxes, or real estate taxes too. All that said, the only thing worse than having to pay taxes is not having to pay them.
Totally stealing that last line. Big fan of everyone having skin in the game. Too many carrots at the low end of the income spectrum with not enough sticks.
Paying taxes and then getting a refund is an oxymoron.
Everyone above incomes of $25,000/ should pay taxes and there should be no deductions whatsoever.
By developing a fair system for all and giving poor the fair treatment, we can do away with many perks with poor get like HUD, special interest loans, being on Medicaid for non-disability issues like depression etc.
Things should be fair for all, not equal including those in the working class also know as middle class.
Off topic but I take issue with referring to depression as a non-disability issue. I will argue firmly that severe depression and many psychiatric illnesses can be far more disabling than physical disability.
@ whitecoat investor:
ratios are used for comparisons.
Compare tax/income ratio of lower income to higher incomes.
the more i find more and more blogs and websites started by ED physicians the more and more I regret my time consuming choice of field.
is there any field that significantly pays higher per hour than ED, or just tie with them?
There are lots of fields, mostly surgical or procedurally-oriented, that have similar hourly rates to emergency medicine. But EM is a fantastic way to trade time for money at a very high rate. Of course…the time you’re trading might be at 3 am on Christmas morning.
Just curious as I know there is a lot of debate in this area, how was your experience with the military scholarship? With what branch did you sign and would you reccomend it to incoming medical students?
Experiences can be highly variable. Have you seen this page?
https://www.whitecoatinvestor.com/personal-finance/should-i-join-the-military-to-pay-for-medical-school/
If you still have questions after reading it, let me know.
If I could respectfully interject – that post is great and so is the one linked above. I will point out that many of us have a very different experience than WCI in that he did military med student (best paid), then civilian residency (worst paid), then military doc in an otherwise lucrative specialty (also worse pay.)
The more common route is military med student (best paid), then military residency (best paid), then military payback time (worse pay for surgery, ER, but not far off par for FP, Peds, IM.)
However I’m sure WCI would agree with me on this – only do the military if you WANT to serve in the military. The finances will not make up for it.
So if you know PRIOR to med school that you want to do a really lucrative specialty AND you KNOW that you will match in that lucrative specialty, then it is not a great financial deal. But most med students don’t know those two things.
The teacher’s income side of this is way off. Teachers dont net 33 an hour after all of the different taxes once they start working, let alone once the training period is averaged in. This is immediately apparent if you look at pretax annual salary on salary.com and assume an average work year of 2000 hours(conservative, considering that teachers work before and after the bell and often spend time at home preparing lesson plans) It may be somewhat closer once the teacher’s benefits are included, but in that case the whitecoat investor should also include that 15000 bonus package he is paying himself as “net income”, which he isn’t in his current calculation. Anyone who is not familiar with this issue should do their own research on teacher’s pay instead of taking the articles word for this very important part of the debate. Also, a teacher can’t exactly choose to work doctor like hours and make more money at will.
The point is that thanks to a much earlier start, much lower amount of debt, significant benefits packages, a paid pension, and the progressive nature of our tax code that doctors don’t make as much as society thinks and perhaps not really much more than what most people consider very middle class. If you want to quibble about the figures and assumptions, take it up with Ben Brown. If you think teachers are under paid, join the club. If you want to make more money and see medicine as a great way to do that, the door is open to any and all who are capable and willing to put the time and effort in.
Not everyone can pass the MCAT. But I have really enjoyed this discussion and the blog itself. My husband is a teacher and I fell in love with him when he was pre-med. Our lifestyle is a little different than that which I had planned for myself, but I do not regret his choice of profession when he is home every summer and every weekend.