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Are physician salaries in Canada a bubble that is waiting to pop?


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13 minutes ago, zoxy said:

Canadian home buyers can afford their loans.

I agree with everything you said, until this last sentence. It is only the "average Canadian" homeowners who already have "skin in the game", who are able to afford to buy houses. Average Canadians with 80k salary without an existing home, will never be able to afford a house without significant corrections in the real estate market or unless they inherit one from their parents.

The "average Canadian" with 80k salary who bought their house >10 years ago for $500k (say they take a $400k mortgage after 20% down payment), and their current home value has appreciated to $1.8m. Their total mortgage remains only at ~$400k, which is affordable based on an 80k salary.

On the other hand, if a first time home buyer wants to purchase the same $1.8m property, they would need a down payment of $360k (almost equivalent to the entire mortgage of the individual above, and a mortgage of $1.42m. I am willing to bet that most "average Canadians" on 80k salary do not have $360k laying on the side ready for a down payment, and will not qualify for a mortgage that is 18x their annual income.

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I wish more folks realized this. The Canadian government doesn't accept more immigrants out of the goodness of its heart. It's mainly to support the government's tax base and to keep the public sector

In my admittedly uninformed opinion, it's less a bubble than people realize. There are five main factors make housing in Canada very expensive and I don't see them changing. 1) The exemption of p

You guys are missing the point, high compensation for any government job can be negated by inflation. Yeah you might make 300K today, but if I keep you at that level for 3-5 years (aka what ON and AB

43 minutes ago, offmychestplease said:

you seem like you know a lot on this can you address my (basic) questions above lol

The answer to your questions is essentially yes. But first you have to divide people into two main groups, property holder and non property holders:

For the first group, a large number of people are spending a large proportion of their salary on rent. There are many people who are living paycheck to paycheck and are an eviction away from either homelessness or moving back in with their parents. Many more people than before are living at home. And when people like working professionals who should be able to buy at ease eventually buy, they're stuck in a situation that's known as being house poor. They have a house, but can't spend money on things like retirement, stocks, kids, vacations. But the ever increasing prices makes them bite the bullet and buy a house.

The second group, the asset holders, are perfectly fine. They can swap from one house to another house when their previous house appreciates and they have more money for a bigger house/mortgage. Because their money is being spent on an appreciating asset and not going to rent, this benefit accumulates. There are also tax loopholes(which the government knows about but won't close) that you can use to reduce the interest payments. There is an inter-genrational element of transfer as well. If someone is lucky enough to inherit a home in the GTA vs inheriting a home in Timmins or Thunder Bay, they stand to inherit a whole lot more which they will then use for down payments and further asset accumulation.

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19 hours ago, ArchEnemy said:

I agree with everything you said, until this last sentence. It is only the "average Canadian" homeowners who already have "skin in the game", who are able to afford to buy houses. Average Canadians with 80k salary without an existing home, will never be able to afford one without significant corrections in the real estate market or unless they inherit one from their parents.

The "average Canadian" with 80k salary who bought their homes >10 years ago for $500k (say they take a $400k mortgage after 20% down payment), and their current home value has appreciated to $1.8m. Their total mortgage remains only at ~$400k, which is affordable based on an 80k salary.

On the other hand, if a first time home buyer wants to purchase the same $1.8m property, they would need a down payment of $360k (almost equivalent to the entire mortgage of the individual above, and a mortgage of $1.42m. I am willing to bet that most "average Canadians" on 80k salary do not have $360k laying on the side ready for a down payment, and will not qualify for a mortgage that is 18x their annual income.

Yep, 100%. I should have been more specific about this. It's a dog fight if you're buying your first place. You will 100 percent be house poor when you buy your first property(invariably a condo) and you better not get laid off or have your income cut. Even if those don't happen, you won't have any money for retirement, vacation, kids, etc. All your money will go to the old fella(or his kids) who bought the home for 20,000 in 1968. Biggest generational wealth transfer ever.

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1 minute ago, zoxy said:

Yep, 100%. I should have been more specific about this. It's a dog fight if you're buying a first place. You will 100 percent be house poor when you buy your first place and you better not get laid off or have your income cut. Even if those don't happen, you won't have any money for retirement, vacation, kids, etc. All your money will go to the old fella who bought the home for 20,000 in 1968. Biggest generational wealth transfer ever.

Well said - it seems major cities in Canada have turned into Europe in a generation - 50 or 100-year mortgages next (like Switzerland)?  

Great earlier post- I never realized that zoning laws seem to explain so much of the "sprawl".  I suppose one way to combat high housing prices has always been to increase the length of commute, but a long commute would be pretty brutal as staff and I'm sure the prices have been rising everywhere.  

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35 minutes ago, zoxy said:

Yep, 100%. I should have been more specific about this. It's a dog fight if you're buying your first place. You will 100 percent be house poor when you buy your first place(will be a Condo) and you better not get laid off or have your income cut. Even if those don't happen, you won't have any money for retirement, vacation, kids, etc. All your money will go to the old fella(or his kids) who bought the home for 20,000 in 1968. Biggest generational wealth transfer ever.

Our generation will spend the rest of our lives paying off the baby boomer's profits, and the debts incurred by them (national deficit is 268bn as of March 2021). :mad:

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44 minutes ago, ArchEnemy said:

Our generation will spend the rest of our lives paying off the baby boomer's profits, and the debts incurred by them (national deficit is 268bn as of March 2021). :mad:

I feel like being in your 20's in the 1980's was GOAT. Getting into medical school was easier, everything was so cheap (even inflation adjusted), physician income in the 80's and 90's was higher than it is now as well as respect/status of the profession, you didn't have to worry about all the saturation in so many specialities, social media didn't destroy the world, finding a spouse was easier...then in 90's you were in your 30's and still got to enjoy all of the cool things that brought with it while still being somewhat youthful and earning amazing income if we are using a physician as an example here, 40's in 00's, 50's in 'the 10s you got to retire on your heap of money, house skyrocketed 10-20x in value, get to enjoy the tech of this day and age, 60's in '20s now you are chilling when everyone has so much anxiety about finding work, buying a house, finding a spouse etc

tl;dr - baby boomers - GOAT life lol

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7 minutes ago, offmychestplease said:

physician income in the 80's and 90's was higher than it is now as well as respect/status of the profession arguably

Weren't physicians income really small which is why we saw the brain drain to the US. From my understanding Canadian physician incomes increased in the late 90's - early 2000's to keep more physicians here.

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Just now, MasterDoc said:

Weren't physicians income really small which is why we saw the brain drain to the US. From my understanding Canadian physician incomes increased in the late 90's - early 2000's to keep more physicians here.

oh maybe I'm wrong I thought it was higher in the 80's and 90's and dropped off since. You could be completely correct. I just know that now it's not as high as it once was - don't know if that was 80's/90's/00's or whatever

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1 hour ago, offmychestplease said:

oh maybe I'm wrong I thought it was higher in the 80's and 90's and dropped off since. You could be completely correct. I just know that now it's not as high as it once was - don't know if that was 80's/90's/00's or whatever

I think you are referring to salaries in the US, where they definitely were higher in a 60's, 70's and 80's. You see US physicians echoing this, but I think they forget that salaries have fallen in all sectors after the 80's not just in medicine. This is why you need two incomes to run a household where in the 60's you usually just had the man as the breadwinner. 

I think this is due to jobs being outsourced to China and the introduction of women in the workforce. When you have twice as many people in the workforce, the commodity of labor goes down and companies start paying their employees less.

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Physician productivity simply is difficult to increase. Some odd areas like ophtho has benefited a lot from technology and they can do complicated procedures quicker at an unheard of pace 50 years ago.

The psychiatrist haven't found a way to condense a 50 min interview into 15 minutes using technology. The pathologist still use glass slide technology like 100 years ago. The FM still uses fax machines for requisitions and bloodwork results. Their productivity might have increased somewhat with EMR but the bulk of their work is still highly inefficient. 

Patient still demand to "see" their doctor even if the work can be delegated to a nurse. The doctor still has to come in and say hi lol. 

The grocery store cashier and taxi driver and many other labor intensive fields face the same problem. AI is promising to revolutionize things, we shall see what comes out of it. 

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And to answer the question about housing, with advent of technology and transportation there have been a decline of "things" of value. So more and more people are desperate to look for "things" to store value with flood of money coming from Fed when $ was no longer exchangeable for gold, hence people now look toward blockchain etc. House and land is more or less fixed so most intuitive storage of value, plus you can leverage a mortgage to buy it. 

A 100 years ago furniture and china was worth tremendous value, so when people immigrate from Europe to North America they brought their furniture and porcelain sets. I am sure nowadays some antique or high end furniture and china is still worth a lot, but for ordinary family it would be insane to carry a china set as storage of value lol.

 

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Assuming you had a place to live in Toronto and no debt and were in and were interested in a specialty compensated at around 350k cad but had to be tied to big centres and generally academic so higher tax bracket so take home probably 175k (not sure if salaried or FFS clinician scientists can reduce the tax somehow).
 

Is it worth it to try and move to the US for the higher salary and lower taxes? Or would it be better to just ride out your free housing and not grind too hard after residency in Toronto? I don’t see Canada being the best for doctors after all the debt we’ve incurred not sure if the taxes could get any higher. But then again if you don’t have to spend it on housing I assume you’ll be comfortable either way and can just focus on the medicine. 

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On 4/13/2021 at 11:27 PM, offmychestplease said:

this is what my mind cannot comprehend. Even though I'm not in TO/VA I often think physicians who literally earn in the top 1% of income in Canada (or even better in some cases) worry about affording a detached home in TO/VA (avg cost is 1.8 million now)...what about the 99% of other Canadians?? If the average Canadian income is like 50K and household income 80K how can the "average" Canadian even dream of getting close to buying a house in these areas? Can someone who lives in TO/VA or has knowledge on these areas enlighten me on how "average" earners even live there?? is everyone renting?? is everyone using a majority of their income just to pay rent?? there can't be just millionaires that live there..

I think a lot of it can be explained by rent control and people inheriting homes. I used to wonder this as well when I worked downtown TO for the first time and I saw so many regular looking people living in these areas.

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- a lot of people have the Bank of Mom and Dad. Because their house has appreciated in value, they're able to take that money either for their children's downpayment, or help them with other living expenses.

- rent is expensive but job is still concentrated in urban centers much more than rural centers. People have tight budgets but manage to find savings elsewhere. Job is usually the biggest attraction.

- many other cultures are more acceptable of multi generational living, and now more than ever it's acceptable to live with your parents. Other arrangements such as buying a house together with another family is also gaining traction.

- don't underestimate the amount of wealthy people that are in Toronto. For every house there is a paper millionaire behind it, and there are lots of houses in the GTA. And we haven't even mentioned commercial properties yet. 

- I think most importantly, average is a terrible statistics, and income /= asset. Average is too prone to skewing by low ends and high ends. Also a lot of wealthy people do not claim much income, but have tremendous assets. A joke/truth is that Warren Buffet earns a "salary" of 100K and pays less average tax than his secretary.

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This is a good case study of the factors I mentioned above. https://torontolife.com/real-estate/a-thornhill-family-listed-their-home-for-well-below-market-value-after-125-viewings-and-14-offers-it-sold-for-458000-over-asking/

- First their original home appreciated in value, giving them the confidence to "buy up" another more expensive home.

- Second, the article specifically mentioned them taking advantage of low mortgage rates.

- Third, they appear to be successful business people, at least their business haven't been impacted by COVID to the degree to make them think twice about upgrading to a more expensive home.

So a lot of the underlying fundamentals has been already happening in the last 10+ year. COVID accentuated some trends, but did not create the trend. For example, people working as waiters were unlikely to be home owners to begin with, which means they missed out on 10+ years of appreciation, and now they just get another nail in the coffin the form of been laid off, but the tomb was already more or less constructed around them. The 2 fundamental issues IMHO are:

- Low interest rate, which disproportionately benefit those the use capital to make money rather than labour. 

Think about how many % the SP500 rose each year between 2009-2021, and ask yourself if your salary has rose at the same pace. Both government and central bank haven't got any bones to cut open and drain an abscess. All they do is put Voltaren cream on the skin! It's not surprising though, because draining the abscess would deeply hurt entrenched interests. For example, homeowners who don't want to see their house lose value, big banks who don't want their mortgage to go sour, real estate developers, the list goes on and on.

Then what happens is that people, government, and society lose interest in industries and involute into manipulating assets. It's hard to blame people though. Why study or work harder or try to improve your factor's efficient or invest in machinery to make long term money when you could be flipping houses, crypto or whatnot and make quick cash?  See https://financialpost.com/news/economy/former-industry-minister-takes-parting-shot-at-canadas-risk-averse-business-community

- Failed education policy. There is huge demand in many industries, including IT and other STEM fields, where they resort to importing foreign workers. 

People were fed the slogan "study what you like and pursue your dreams". That adage works well for upper middle class to upper class children who already have a foundation. If your parents are on the board of director of a major corporation, or are senior ministers in the government, it doesn't matter if you study history, or visual arts, or mathematics, or basket weaving, a good job is gonna be dropped to into your laps. Yes Bill Gates was a university drop out, but they conveniently fail to mention he was smart enough to be studying at Harvard, and there is zero evidence that he flunked out. He was already eating cake, he just wanted to venture out see if he can eat fancy macaroons.

 

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1 hour ago, shikimate said:

- Low interest rate, which disproportionately benefit those the use capital to make money rather than labour. 

Think about how many % the SP500 rose each year between 2009-2021, and ask yourself if your salary has rose at the same pace. Both government and central bank haven't got any bones to cut open and drain an abscess. All they do is put Voltaren cream on the skin! It's not surprising though, because draining the abscess would deeply hurt entrenched interests. For example, homeowners who don't want to see their house lose value, big banks who don't want their mortgage to go sour, real estate developers, the list goes on and on.

I keep hearing from every economist that it's the only option the Fed had. Otherwise we'd be in a great depression if they hadn't been so aggressive with their monetary policy. While I'm not necessarily disputing the need for aggressive monetary policy in 2008-11, I don't understand why they were so passive about raising interest rates when the economy was well on its way to recovery after 2012.

The BOC and the Fed were keeping their rates under 2 even when it was clear as day that we were living through an asset bubble during the late 2010's. I remember reading an interview with Raghuram Rajan, a professor at the University of Chicago and the former Governor of the Bank of India, way back in 2016 and he said that loose monetary policy was being used to prop up the structurally unsound economies that were in dire need of reform. I feel like many folks were raising the alarm in the preceding years so it's not a case of Monday morning quarterbacking.

Because the broader economy is not sound, governments around the world are leaning on central banks to keep the good days going. Passing structural economic reform is tough and more importantly unpopular. Such reforms will lead to some people tangibly losing in the present while the benefits of the reform are usually in the future and thus intangible. Since politicians don't give a damn about the future, and are always focused on poll numbers and the next election, they have no reason to actually do anything unpopular. All they do is keep a country on whatever path it's on, regardless of how calamitous remaining on the path may turn out.

I think the best modern example of the political peril of labour reform is Germany.  In the early 2000's Germany was the "sick man of Europe" until they reformed their labour laws in the Hartz Reforms. It was extremely unpopular among labour unions and the poor, the power-base of the governing SPD party. But Schroeder, the chancellor at the time, did what the thought was best for the country. This ultimately led to his political demise and a lasting decline in the SPD's popularity to this day. Merkel has been coasting on the reforms implemented by the previous administration.

I don't see many politicians today who are willing to stick out their neck and risk their political fortunes by doing something unpopular but necessary. I think that this holds true for all three main parties in Canada.

 

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On 4/5/2021 at 2:52 AM, MasterDoc said:

So as the boomers get old, we will have more old people than tax payers. Our government will be scrapped for money and the deficit that covid created, we will have to pay for this also. I think inevitably they will have to loosen medical school restrictions and allow more people to matriculate. With less taxpayers and more doctors, I think the physician salary will drastically decrease. 

We already can't create jobs for specialists as it is now, and I think the medical profession may be headed towards doomsday. Any thoughts? I really wish the future didn't look so bleak :(

 

If every physician worked completely for free (while somehow maintaining the same degree of productivity), that would give the provincial governments maybe 5-6 years worth of buffer zone before they end up in the same position of debt.

Unless there is complete collapse of the American system, Canadian physician earnings will be maintained. As others have mentioned, property and expenses may still make things unaffordable even if earnings are maintained however.

The biggest change will probably be less coverage (or more stringent indications) for things like advanced malignancy treatments and orphan diseases.

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On 4/14/2021 at 8:05 AM, shikimate said:

Physician productivity simply is difficult to increase. Some odd areas like ophtho has benefited a lot from technology and they can do complicated procedures quicker at an unheard of pace 50 years ago.

The psychiatrist haven't found a way to condense a 50 min interview into 15 minutes using technology. The pathologist still use glass slide technology like 100 years ago. The FM still uses fax machines for requisitions and bloodwork results. Their productivity might have increased somewhat with EMR but the bulk of their work is still highly inefficient. 

Patient still demand to "see" their doctor even if the work can be delegated to a nurse. The doctor still has to come in and say hi lol. 

The grocery store cashier and taxi driver and many other labor intensive fields face the same problem. AI is promising to revolutionize things, we shall see what comes out of it. 

A bit of a digression but most pathology (and radiology) work will likely be eaten up by AI over the next few decades. There will still be pathologists/radiologists but there likely won't be any growth in the number of positions as it will be possible for the same number of docs to do the work of many more due to AI making things much easier. Many other fields won't be immune either. Several rad onc staff have told me that AI is already almost as good at contouring as the physicians themselves and should surpass humans in a decade at most.

If I had to guess, the relative reduction in physicians per capita will help maintain renumeration and probably make medicine an even more lucrative field. Medical school admissions will continue to get even more competitive and that will continue to drive the trend of overtraining and overqualification in medicine. Overall, probably a sweet gig for those already in but a nightmare for future prospective trainees.

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14 minutes ago, zxcccxz said:

A bit of a digression but most pathology (and radiology) work will likely be eaten up by AI over the next few decades. There will still be pathologists/radiologists but there likely won't be any growth in the number of positions as it will be possible for the same number of docs to do the work of many more due to AI making things much easier. Many other fields won't be immune either. Several rad onc staff have told me that AI is already almost as good at contouring as the physicians themselves and should surpass humans in a decade at most.

If I had to guess, the relative reduction in physicians per capita will help maintain renumeration and probably make medicine an even more lucrative field. Medical school admissions will continue to get even more competitive and that will continue to drive the trend of overtraining and overqualification in medicine. Overall, probably a sweet gig for those already in but a nightmare for future prospective trainees.

George Hinton predicted by in 2016 that by now radiology would be automated, yet in the modern day the overall demand for radiologists is at an all-time high. The daily workflow of radiology and pathology remain untouched by AI. IBM Watson, which was supposed to be a gamechanger in oncology has also completed failed to deliver. It's become clear that for the past few years companies have been hyping AI in an effort to garner more investor $$$.

AI will probably have some usage in the coming decades, but it will probably be like any other new technology, which increases our efficiencies in certain areas and creates new work in others.

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The likely outcome will probably be vertical differentiation of products. For example, machine signout of pap smear is already quite prevalent. But abnormal findings still require human interpretation. Hence it is likely that when AI gets really good, they'll be able to do a lot of routine interpretations or even interactions such refilling prescriptions, prescribing for minor ailments etc. However those that demand a second opinion or human interaction will likely be willing to pay a premium for such services, but the number will be selective and services will be catered to their individual needs and ability to compensate.

One corollary I can think of is banking. Nowadays most average joe can do 95% of their banking online/ATM, and might do 5% at a branch with a randomly assigned or basic level advisor. However, as we've seen, there's an explosion of wealth management catered towards the ultra high net worth, including family offices for those >100M. The difference between these 2 levels of service is stark to say the least, so no wonder the ultra high net worth are able to generate more wealth and pass their wealth successful from generation to generation.

Another example I can think of is law school in USA. It is already well known that large firms won't even look at CV of candidates from schools that aren't on their "target list". Therefore the quality, caliber and success of law school graduates will keep widening. Of course ordinary joes probably will be able to afford legal service from a top firm, so the mass of mid to low tier lawyers will adequately serve the general population while the top 1% serve the top 0.01%.

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On 4/13/2021 at 11:33 PM, offmychestplease said:

you seem like you know a lot on this can you address my (basic) questions above lol

as someone who has lived in toronto with many friends in toronto, they don't buy houses. There are a couple scenarios:

 

1) parents give them money for down payment

2) move out of the city to Hamilton, Kitchener, etc etc for affordable real estate, which still is expensive 

3) rent and STILL pay 50% or more of income to rent if trying to live alone...many of my non med school friends are still living with roommates paying 800-1000$ a month for a room in an apartment. 

4) least likely is make own money by being in one of those very high income jobs and buy a house in toronto. 

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  • 3 months later...

In my opinion salaries are not high at all if you consider all the years required to become an MD and the sacrifices involved. I don't see doctor's paychecks decreasing any time soon. The stats show that more women are entering in the medical field but I'm not ready to say this is the reason for a potential decrease in salaries.

For my part, I'm still planning on becoming a doctor but if money is what you are looking for then look elsewhere. My dad got his studies in engineering paid by the army and now makes a shit load of money with way less commitment to his studies.

 

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5 hours ago, Zachary Turbide said:

In my opinion salaries are not high at all if you consider all the years required to become an MD and the sacrifices involved. I don't see doctor's paychecks decreasing any time soon. The stats show that more women are entering in the medical field but I'm not ready to say this is the reason for a potential decrease in salaries.

For my part, I'm still planning on becoming a doctor but if money is what you are looking for then look elsewhere. My dad got his studies in engineering paid by the army and now makes a shit load of money with way less commitment to his studies.

 

i'm so tired of the "don't go into medicine for money" argument. people constantly say if you're after money, go into finance, tech, or engineering. fact is, engineers do not make on average $350k-400k a year like physicians do (this is the average. many will bill into the 7 figures depending on speciality/workload). most of my friends who went into business work as consultants or in a bank making $60-70k a year. computer science is great but you will max out at $120k-150k/year as a senior coder/computer engineer.

of course, with all of these careers, you WILL have the outlier who makes $200-300k+ or even gets into 7 figures... but they're the outliers. they're the top of their field. however, EVERYBODY who graduates from a Canadian medical school is pretty much guaranteed $400k/year (before tax and overhead, yes). there's no other career with this level of job security and guaranteed mid-six figure earnings.

having said all of that, if you truly hate biology/medicine, the money will not make the career worth it.

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