Doctors, Teachers and Hockey Players

A few weeks ago I was having a facebook discussion with a friend of mine about physician pay. I felt it was too high (I was wrong). She argued that in fact it was barely fair and probably much too low. “Doctors should be payed like professional athletes,” she argued. This seemed crazy to me at the time. It also made me a little curious, so I wanted to run the numbers over the entire lifespan of your average doctor and average hockey player.

If you are comparing superstars, then NHL players certainly look very overpaid. Sydney Crosby will make $16.5 million this year including endorsements. Endorsements will decline over time. Superstars also have longer careers. Let’s say 20 years for someone who starts at 20. At the start and end of their careers superstars are paid considerably less, so let us say a total compensation of around $200 million. In contrast, the highest paid physicians make about $550,000 a year. Let’s assume they make peak earnings for 20 years with slower years on the front end and back end of their work life. This puts them at a comparatively modest $15.5 million for their career. 

However, Sydney Crosby is not the norm among NHL players, nor is the $550,000 physician. Since the average NHL career is 5.5 years and the average NHL player makes about $2.5 million a year for those 5.5 years, they make around $13.2 million. After 25 or 26 they then retire and assuming they do nothing (which is unlikely) and just collect their $50,000 pension they make another $2.6 million before they die at the average age of 78. 

This is a lot of cash. So let’s look at how doctors stack up. Your average doctor has a long career. They average around 35 years. The average doctor in Ontario makes $340,000 annually. So running the rough numbers, the total work revenue for a doctor is $11.9 million over their career. Since those in private practice must pay for their own pension, while those who work in hospitals have some form of pension, let us err on the side of caution and say the average doctors pension is $30,000 (excluding CPP and other forms of support) for the 13 years they would live in retirement, giving a total retirement income of $390,000. 

In total, then, NHL players and doctors are payed $15.8 million and $12.3 million for their troubles, respectively. This means the average doctor makes 78% of the income of the average NHL player.

Now some would object that doctors have a much larger economic impact than hockey players. This is definitely true over the course of an entire career, but not necessarily on a year by year basis. Recent studies from the University of Ottawa show the Senators add $204 million to the economy annually. Assuming the player making the average salary on the senators (Chris Phillips made $2.5 million this year) and that his proportion of the overall payroll is proportional to the direct and indirect economic impact he has, it means Phillips is responsible for 4% of that $204 million, or $9 million annually. In contrast, doctors add $3.3 million to the economy annually, according to the American Medical Association. There is little reason to assume this would be significantly different in Canada. So the average economic benefit over an entire working career would look like this:

As you can see, the average NHL players has a total career benefit of $50 million dollars to the economy. Doctors, because they work longer, have a larger overall benefit that more than doubles that of NHL players. On a per year basis as well, doctors pay is only around 12% of their total annual economic benefit. Whereas hockey players make about 28% of their total annual economic benefit. In short, doctors are in no way overpaid, but it isn’t clear that they are underpaid either, as many economic benefits are indirect. In contrast, our NHL player seems to be making pretty great money as a proportion of indirect and direct economic benefits.

So doctors are paid almost like NHL players, as it turns out and produce an even greater economic impact. However, one might argue that both the average doctor and the average NHL player produce significant benefits that exceed the compensation they receive. This means we are certainly getting a fair return for money spent.

So what about other professions, like teachers? This is where things get even more interesting. When we look at conservative statistics regarding the impact of the average teacher on the economy, our graph looks like this:

Your average teacher produces $52 million, slightly more than the average NHL player, in economic benefit over the course of their career. On a yearly basis this is conservatively around $1.5 million. 

Now, when we take the average teacher salary in Ontario of ($53,000 a year) and assume a career length of 35 years and 18 years of retirement we get a lifetime income of $2.75 million. Here is what our second graph now looks like:

Teachers are not payed like NHL players or doctors, that is for sure. However, their economic benefit is greater. In fact, on an annualized basis, teachers are paid on average only 3.5% of their overall economic benefit. Compare that to the ratio of doctor pay (12%) and NHL player's pay (28%) to their annualized economic impact and it becomes pretty clear that teachers are the best deal going from the standpoint of economics.

© Braden Hutchinson 2014