For years free trade agreements have put manufacturing workers in the U.S. in di

ID: 1162725 • Letter: F

Question

For years free trade agreements have put manufacturing workers in the U.S. in direct competition with their developing country counterparts with the purpose of driving down wages in the U.S. and bringing in cheaper imported goods. All the while highly paid service sector workers such as lawyers, doctors, CPAs, and the like are shielded from competition from developing country service sector workers who would be glad to come to the U.S. and enjoy relatively higher wages. This effectively means that highly paid professionals get to enjoy the benefits of cheaper imported goods, while still having their inflated salaries. This has exacerbated inequality in the U.S. due to the fact that manufacturing workers who have effectively had their wages driven down still have to pay for expensive professional services that have not commensurately come down. This is not only economically inefficient, it is ethically wrong due to the fact that lawyers are the ones who actually author free trade agreements and corporate and special interest groups representing the professional service sector are usually at the negotiating table when they are being authored. U.S. doctors have some of the highest salaries in the world as evidenced by the graph below that compares general practitioner pay amongst fellow OECD member countries. (Note: The data is old due to the fact that the American Medical Association no longer collects salary data for general practitioners)

Assignment:

Read the following article on the issues surrounding the international medical graduate licensing process:

http://www.nytimes.com/2013/08/12/business/economy/long-slog-for-foreign-doctors-to-practice-in-us.html?_r=0 (Links to an external site.)Links to an external site.

Answer the following questions:

1. How could increasing the number of doctors in the U.S. affect macroeconomic variables such as productivity, GDP per capita, inflation, etc.

Figure 1. Remuneration of GPs in USD PPP, selected OECD countries, 2004 (or closest year available) 146 United States (2003) United Kingdom (2004)* Netherlands (2004) Germany (2004)* Iceland (2005)* Austria (2003)* Luxembourg (2003) Switzerland (2003)* Canada (2004) France (2004) Finland (2004)" Czech Republic (2004) 121 120 112 109 108 108 108 106 84 56 Self 200 150 USD PPP, thousands 50 100

Explanation / Answer

The increasing number of doctors in the US will affect the macroeconomic variables such as productivity, GDP per capita and inflation in the ways discussed below:

First let us understand the situation. The amount of healthcare spending is on the rise as medical treatments are expensive in the US. The number of doctors, however, are not enough due to many reasons such as the process for international doctors to be licensed to practise in the US. Many Americans too find it difficult to meet the reuirements to become a licensed practitioner and study medicine in the Carribean or somewhere else abroad. Thus, many prefer not to opt for medicine as a career option. There is a shortage of doctors in the US as a result of this. Studies suggest that the shortage of medical professionals is expected to rise in the future.

From an economic perspective, there is an inelastic demand for doctors as the fees is high and the supply of doctors is low and the demand for doctors is high. This added to the increased healthcare spending is only affecting the GDP negatively as the expense side goes up and the output is low( from the healthcare perspective). The amount of consumption spending on healthcare is high overall but the returns are not equal as there are not enough doctors to treat all the patients. Since, the GDP is affected, the GDP per capita will be affected in the same way. Inflation rises due to inelastic demand for healthcare professionals. And healthcare spending per capita in the US is the highest among most countries. The main reason for all this is a shortage of medical professionals. Thus, a rise in doctors in the US could lead to a rise in productivity, GDP per capita, and reduce inflation by a significant amount.

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