Why Is It So Hard to See a Doctor? High Wages and the Backward Bending Supply Curve for Labour.
I have not been able to see my GP in person for 2 years. Worse, getting hold of a virtual appointment involves an 8am “stampede” on the telephone with no hope of success. On 3 occasions myself and my family have had to use private practice to manage various low level concerns… with success.
1/10th of us are on an NHS waiting list somewhere; and we have some nifty new tech to tell us how long we can expect to wait: https://nhswaitlist.lcp.uk.com/
The very fact of these waiting lists is “forcing” more people to use private healthcare:
We have spoken before about causes of the waiting lists: when something is priced at £0 at the point of consumption, demand is inevitably going to outstrip supply.
One issue is the apparent lack of doctors. There are regular calls for pay to be improved. This seems to make sense: usually when a product is in short supply it is an increase in its price that brings forth greater output. So will increasing salaries or wages bring forth a new supply of medical staff? Back in 2006, the Blair Government awarded huge pay rises (up to 25%) with some GPs earning £250,000 per annum. Yet that did not solve the crisis. In fact it might well have made it worse!
We hear now that almost 9 out of 10 GPs work less than full time: NHS England says almost 90% of GPs work part time in response to Pulse survey — Pulse Today
“Figures from NHS Digital for September 2018 show that 73% of salaried GPs work between 15 and 37.5 hours a week, and a further 14.6% work less than 15 hours a week”.
It would seem that high salaries do not bring forth more working hours in the medical profession. Instead, paying doctors more per hour simply seems to cause them to work less hours — thereby placing yet a greater burden upon the tax payer, who not only has to pay more to fund doctor salaries but then struggles to see a doctor when they need to. Why is this?
Economic theory can help us to make sense of this situation by analysing how a worker’s labour supply decision will respond to a change in the wage rate.
A change in the wage rate will have two effects on the supply of labour, and interestingly, these two effects can work in the opposite directions.
Let us imagine that the NHS, needing more labour, raises the rate of pay per hour. Will an individual doctor want to work more hours as a result? The point here is this: in choosing whether or not to work an extra hour the doctor must compare the benefit of this extra hour in terms of higher pay received with the cost of working this extra hour — which is the hour of leisure time forgone. What complicates this decision is the fact that leisure is a Normal Good: i.e. as incomes rise, people wish to have more leisure.
To analyse the effect of an increase in wage rates we therefore distinguish two effects:
The Substitution Effect: As wage rate increases, the opportunity cost (or “price”) of leisure time increases, so the doctor will switch to offering more work time. E.g. if a doctor was initially paid £20 an hour, an hour’s leisure costs her £20 in terms of wages forgone. But if her wage rate rises to £30, then the cost of an hour’s leisure will rise to £30, and this effect, by itself, will cause her to want to substitute more work for leisure and work more hours — so the substitution effect of a wage rise is to make her want to work more hours than before. More patients will be seen.
The Income Effect: As the wage rate increases, as leisure is a normal good, people such as doctors will want to offer less work time and spend more time in leisure. Another way of thinking of this is that they can achieve a target income level with fewer hours of work. This means that as the doctor’s wage rate rises from £20 an hour to £30 an hour, her total income will rise and she will want to have more leisure time — more time at the gym, or meeting friends for coffee, or more time with her family . Thus, due to the income effect alone, a rise in wage rates will cause her to work LESS, not MORE.
Clearly, the overall effect of an increase in the wage rate on labour supply will depend on the relative strength of the substitution and income effects for doctors. If the substitution effect of an increase in wage rates exceeds the income effect, then a doctor will want to work more hours; and if the income effect is greater than the substitution effect, they will want to work less and maybe go part time — as we see so many doctors in fact do.
These relationships can be modelled through the backward sloping short-run supply curve for labour.
At first we assume that the substitution effect of an increase in the wage rate is stronger than the income effect — so as the wage rate rises the supply of labour such as doctors increases and the short-run supply of labour curve slopes upwards from left to right. However once wage rate W2 is reached, the income effect causing individuals to demand more leisure begins to be stronger than the substitution effect and the amount of labour supplies as wage rates rise actually begins to DECLINE. Hence as wage rates rise beyond W2 the hours of labour supplied actually fall and the supply curve slopes up from right to left — it becomes backward sloping. This is the backward sloping supply curve for labour.
Note that this is the potential shape of a supply curve of labour to a firm or industry with the existing workforce only. It is quite possible that the actual labour supply curve will be upwards sloping if the firm can recruit more labour at a higher wage. Of course in most industries this is what will happen. But in the market for doctors there is a problem: there are very pronounced barriers to entry into the medical profession. No-one can easily shift from another job and become a doctor, attracted by the higher wages. To be a doctor one must graduate from medical school — and hence the supply of doctors is pretty much fixed in the short run and in the long run adjusts very slowly depending on the availability of training places on medical courses.
Thus, the recent experience of the labour market for doctors gives some evidence that the medical profession has indeed a backward bending supply curve for doctors services, and that most doctors are on the backward bending part of the curve. Which means that like other well-payed professionals, doctors value their leisure time and are prepared to trade off income to enjoy it. One can’t quibble with their reasoning: but it means that unless the country expands its medical training provision, or can attract more qualified doctors from overseas, we will all have to be ringing our doctors surgeries from 8am in the quest for a scarce appointment for a long while to come.
Additional content:
https://www.bmj.com/content/375/bmj.n2794
https://ifs.org.uk/publications/15941
The NHS backlog recovery plan and the outlook for waiting lists — Institute For Fiscal Studies — IFS
