The Induced Productivity Decline Hypothesis: More Physicians, Higher Compensation and Fewer Services

Public outrage regarding physician shortages during the past two decades have led to policies aimed at significantly increasing physician supply, yet access remains elusive. In this paper, we examine this puzzling trend and the causes underlying it by analyzing physician supply, compensation and productivity and the reasons behind productivity decline. We hypothesize that excess physician compensation beyond a target income induces productivity decline. In contrast to a wage–productivity gap for the average Canadian worker (where productivity has increased but compensation has not kept pace), physicians are experiencing a “reverse wage–productivity gap” whereby compensation is increasing but productivity is decreasing, resulting in more physicians, higher compensation and fewer services. We conclude by discussing potential policy options to address how best to provide timely access to medical care for Canadians while keeping physician healthcare expenditures at sustainable levels.