A recession is looming, not just for veterinarians but for the entire U.S. economy.
VIN News Service photo
AVMA economist Michael Dicks reported to the House of Delegates that a growing number of seats in veterinary academia means more new graduates are entering the job market. At the same time, he said, older veterinarians appear reluctant to retire. "We have a lot more people after 65 still hanging in the workforce. ... As density of veterinarians increases, average income falls," Dicks noted.
The forecast came from American Veterinary Medical Association economist Dr. Michael Dicks, who addressed the House of Delegates on Saturday in Chicago. He told veterinarians that while the economy should remain healthy for the next eight to 20 months, they can anticipate a downturn that will impact all corners of the profession, from private practice to academia.
Without articulating reasons for the anticipated downturn, he stated: "I have bet my finances on a recession happening in early 2017."
Dicks' prediction comes on the heels of a paper he published last month addressing growth in veterinary academia — new schools and increased class sizes — not seen since the 1970s, and the impact it's having on the profession. Athough Dicks doesn't mention them by name in his paper, plans to create new programs are emerging at Texas Tech in Amarillo and in Miami-Dade County through a partnership with Florida International University. They follow the creation of three other veterinary medical programs in three years: Lincoln Memorial University in Harrogate, Tennessee; Midwestern University in Glendale, Arizona; and the University of Arizona in Tucson, which has not yet opened but is under review by the AVMA's accrediting body, the Council on Education.
Meanwhile, some already-established programs have increased their class sizes to accept more students, a move that some believe is a tactic to help replace funding once provided by state legislatures. School officials say the expansion of their programs make seats available to qualified candidates who otherwise might be locked out of the nation's 30 accredited veterinary medical programs.
During the past 30 years, the number of first-year seats in veterinary schools traditionally have outnumbered the number of applicants by more than 2-to-1, making it easy for programs to select the most qualified candidates. Dicks observed that the pendulum, however, is swinging in the other direction. With the current applicant-to-seat ratio at 1.6-to-1 — the lowest it's been since at least 1980 — he forecasts that the applicant pool is likely to continue to shrink.
The general message from Dicks: Veterinary academia is growing at a time when veterinary medicine as a career prospect may have lost some of its luster. Even so, he said, there are bright spots. As a whole, U.S. veterinary students accumulate $750 million in educational debt each year to pay $650 million in tuition, leading Dicks to believe that students aren't borrowing wildly beyond their tuition costs. Mean starting salaries were in the range of $70,000 a year in 2015, reflecting a $3,000 increase over the previous year, Dicks said. (When asked to expand on those figures, he noted that the 2015 salary findings are not yet published but will be explored in upcoming AVMA reports on the veterinary education market.) The debt-to-income ratio, Dicks added, is 2-to-1 and stabilizing.
Still, a debt-to-income ratio of 1.4-to-1 "would be much more palatable," Dicks said. Six-figure tuition and low salaries could deter would-be applicants.
"We believe that applicant knowledge about debt and cost (of education) is improving and might lead to a change," he told delegates. "The ability of schools to fill non-discounted seats will continue to be more difficult."
That trend, Dicks said in his paper, will negatively impact the profession's applicant-to-seat ratio through the next decade.
"As the cost of education continues to climb, and as college students become increasingly knowledgeable of the financial hardships associated with the profession's high debt-to-income ratio, this applicant-to-seat ratio is forecast to decline even with a constant number of available seats through 2025," Dicks wrote. "However, if the rate of increase in the number of seats at existing schools continues the long-term trend and two new schools are added, then the combination of new seats and declining applicants will bring the applicant-to-seat ratio to an estimated 1.04-to-1 by 2025."
That’s a single applicant for every seat — an unprecedented low. In 1998, there were nearly three applicants for every available veterinary education seat. Ten years later, the ratio was 2.4-to-1, and it has steadily declined since then. Between 2002 and 2013, the numbers of applicants climbed 52 percent, from 4,440 to 6,769, according to figures from the AAVMC's Veterinary Medical College Application Service.
The idea that there’s a great unmet demand for veterinary education clearly has contributed to growth in new schools and elevated class sizes. In his paper, Dicks begins by noting the importance of asking three questions before starting any business: Is it physically possible? Can it make money? If so, can it survive long-term competition?
The final question, he said, is the most difficult to answer.
"The continued push to expand the number of veterinary schools (and thereby the number of seats available to veterinary students) certainly has me wondering whether all of these basic prerequisites are being considered in the planning process and before commitments are made to pursue the necessary approvals and begin the accreditation process," he wrote. "...The market for veterinary education faces a competitive demand for seats from applicants, as well as a competitive market for veterinarians that is derived from the competitive market for veterinary services. Thus, the new veterinary college must consider both forces, now and in the future, in determining the sustainability of its business."
Landscape of education
Between 2012 and 2015, U.S. veterinary academia added more than 500 first-year seats, the AAVMC reports. According to the group's data, 3,586 first-year students were admitted to U.S. veterinary medical programs in 2015, up from 2,570 a decade earlier. Those totals do not include American students earning their veterinary degrees abroad. AAVMC reported that in 2015, 619 Americans graduated from institutions outside the United States, many coming from Ross University, St. Matthews University and St. George’s University in the Caribbean. Another 2,977 students graduated domestically in 2015, bringing the total number of graduates to 3,596.
Within the next three years, the number of new graduates is expected to increase another 7.3 percent, totaling 3,870 Americans graduating from veterinary medical programs on U.S. soil and overseas. About that time, demand for veterinary education will keep pace with the growing number of seats, with the possibility that some could go empty.
"Worst-case scenario," Dicks said, is that the survival of some veterinary colleges soon might be in question.
In his paper, Dicks characterized the relationship between veterinary programs as "extremely competitive." Reports of friction between programs already is on display at Texas Tech and Texas A&M University, the latter of which has run the state's only veterinary college for nearly a century.
"...Veterinary schools will in the near term have to compete for students," Dicks wrote. "With the addition of even more seats, the market for veterinary education would become a buyer’s market, meaning that each applicant (the buyers in this case) would face less competition for seats at veterinary colleges (the sellers in this case) ...
"Based on our modeling," he added, "there is a threshold value for tuition costs that the average student is willing to pay; above that threshold, the number of applicants decreases, and recent analysis has shown that this threshold may be declining."
Translation: In the near future, the number of students willing to pay between $77,055 and $232,528 for in-state tuition and up to $261,308 for out-of-state tuition, will dwindle. Dicks did not specify the break point. His report, however, makes it clear that some programs are in line to struggle, especially those schools with tuition in the top 20th percentile.
"The bottom line here is that unless a new school can provide a veterinary education at a cost to students at or below the threshold in this increasingly competitive market, a veterinary degree program will not likely be sustainable," he said.
Considering the weight that six-figure student loan debt bears on new graduates, Dicks added that the survival of new schools eventually will depend on their ability to either educate graduates for less or train them to attract more demand for their services.
Step forward for AVMA?
To some veterinarians, Dicks’ forecast and analysis reads like a no-brainer, echoing what many in the profession have been saying for years. Others find the statements, coming from AVMA, refreshing considering that until a few years ago, the organization professed a shortage of U.S. veterinarians. Challenged by practitioners feeling squeezed by a tightening job market, that outlook eventually was recanted, though the AVMA said there wasn't enough data to draw workforce conclusions. The issue couldn't be discussed without violating antitrust laws, AVMA legal counsel warned in 2011.
Discontent among veterinarians and criticism of the AVMA has since followed, along with accusations that the organization has sugarcoated a veterinary surplus and failed to tighten the reins on accrediting new programs.
Considering the AVMA's stance on workforce topics, Dicks' paper is a "huge step forward," said Dr. Paul Pion, president and co-founder of the Veterinary Information Network, an online community for the profession and parent of the VIN News Service. Dicks' findings reflect the "observation and logic" long-expressed by AVMA members, Pion wrote in a VIN discussion.
"... AVMA is late to the party — we should all welcome them," he said.
Others are more cynical about Dicks' perspective.
Dr. Frank Marchell in Kittery, Maine, believes the profession is worse off than Dicks asserts. "Economists love graphs, trends, simplifying assumptions, concise if/then scenarios to tell their ‘story,’ he wrote on VIN. "The total picture is messier."
Dr. Bill Folger, a board-certified feline practitioner in Houston, said it’s the prospect of struggling veterinary programs that led the AVMA to release a somewhat negative perspective on the growth of new schools — not the plight of members.
In his paper, Dicks did not explore concerns that the increased number of seats have led to a growing supply of veterinarians in the United States, a condition about which practitioners across the country have long lamented.
"At this time, we do not have a model for the effect on unemployment," Dicks wrote. (By email, he explained that modeling is underway, but there is not yet enough data to draw conclusions.) Dicks predicted that starting salaries likely will be adversely impacted by an increased number of graduates entering the job market.
"This decline in income would exacerbate the existing disparity between growth rates in income and debt, causing the debt-to-income ratio to rise," Dicks wrote. "The rising debt-to-income ratio will likely accelerate the reduction in applicants, perpetuating the potentially negative effects on the market for veterinary education."
Dr. Tony Bartels, a VIN employee with expertise in student debt, noted that the veterinary education market and reality of private practice are "highly disconnected." He added that there’s no real incentive for veterinary colleges to lower tuition when the federal student loan system does not limit how much students can borrow for their education.
"I guess I'm just not that excited by this revelation," he said of Dicks’ report. "Sure, it actually shows some data that looks negative in terms of a new school opening up … but is that really (worthy of) applause? Maybe a sarcastic golf clap, if you will.
"And they certainly didn't say it was a bad idea to open a new school."