(This post was originally written as a guest post for Richer Life DVM. If you haven’t read her blog, you should. It’s a great resource about finances for veterinarians. And if you didn’t read it there first, it’s new to you!)
In discussions among academic veterinarians attempting to recruit a new faculty member, salary is often the first and last word on the matter. “Well, they can make so much more in practice, so they don’t want to enter academia.” I’ve heard this argument for years, but it’s never made sense to me. I think specialists entering private practice may not be earning as much as they think they are.
There are practical differences between the jobs- in private practice specialists are primarily doing clinic duty, with possibly some teaching of interns and residents and the occasional student. In private practice, specialists may work four day weeks (80% clinic time). In academia, specialists do clinic duty, teaching, and research. A typical distribution for a tenure-track clinical specialist is 50% clinic time, 30% teaching, and 20% research. The financial differences come down to four domains: geographical arbitrage, taxes, benefits, and salary. Let’s go through each of them.
Almost every specialty veterinary hospital is located in a fairly large city, because that’s the population which can support expensive, specialized care. In sharp contrast, because many veterinary schools are part of land-grant colleges, they are in rural locations. The cost of living (COL) differential can be substantial. I had a friend go from a university job in a low cost-of-living area to a private practice job in San Diego and acknowledged, “I will be saving much less money, even though the salary is much higher.”
Arbitrage is when you take advantage of different prices of the same asset. Geographical arbitrage is using a different location to reduce your cost of living. Specialist veterinarians can’t even practice in rural areas, UNLESS they work for a university. The cost of living difference can be substantial. You pay much less for life in most towns where a vet school is than in most large cities where private practices are. Here are some examples of how far $100k goes in different cities where specialty practices are and towns where veterinary schools are according to Salary.com:
|City w/Specialty Practice||Town w/University|
|Los Angeles $70k||Davis CA $83k|
|Seattle $84k||Pullman WA $114k|
|Atlanta $98k||Athens GA $109k|
|Chicago $86k||Urbana-Champagne IL $118k|
|Washington DC $63k||Blacksburg VA $113k|
|New York $55k||Ithaca NY $105k|
Obviously, there are some veterinary schools in expensive towns: Fort Collins, Madison, Minneapolis, and Philadelphia come to mind. And Davis is only less expensive relative to other cities in California- it’s far more expensive than most rural veterinary schools. From this quick subset of examples, though, $100k ‘earns’ you about $30k more in a rural town than in a large city (average city in this example = $76k, average town = $107k). Since this is a percentage function, the higher your salary, the greater the absolute difference. Advantage: ACADEMIA.
It goes without saying that, as your income increases, your tax burden also increases. Let’s look at two typical salaries for a starting veterinary anesthesiologist. In private practice, they may expect to make $160k and, in a university setting, about $120k. Assume state and local taxes are similar and the person is married. The private practitioner will have after-tax income of $121k and the university practitioner will have $93k. That difference of $40k in salary now becomes a difference of only $28k of after-tax pay.
This is because the university practitioner pays 22% between $77k and $120k whereas the private practitioner pays 22% between $77k and $160k. The difference would be even more striking if the private practitioner earned a $200k salary- their after-tax income would be $150k. A difference of $80k in salary but a difference of only $57k after taxes are paid. Obviously, $150k is still a lot more than $93k, but it’s less than it seems on paper when you are evaluating straight salaries in an employment offer. Advantage: DRAW.
Everyone knows the benefits in academia are incredible. “Sure, yes, university benefits are great.” I had a fairly blase attitude towards my university benefits until I began comparing notes with some private practice colleagues. “What do you mean your practice doesn’t pay for your health insurance?” “What do you mean your practice doesn’t contribute to your retirement plans?” I had no idea, but it is not uncommon for private veterinary practices to provide absolutely atrocious benefits. As in, almost none, besides paying for the state license fee and continuing education.
The benefits in academia are, frankly, incredible. In addition to generous annual and sick leave and holidays (although those depend on your clinic responsibilities), there is health insurance, retirement, and numerous miscellaneous benefits like reduced tuition for your children and the ability to pay off loans with Public Service Loan Forgiveness (PSLF). The retirement benefits alone can be incredible- a defined benefit plan (pension) for the rest of your life! A match on 403b contributions! One employer I had just put whatever was 10% of our salary into a 403b- no contributions on our end required. The benefits can easily be a 50% bump over and above the salary.
Corporate veterinary medicine benefits are fairly strong, though I have yet to find one that gives a pension. Also, unless they are a non-profit, they won’t qualify you for PSLF. Quantifying the difference between corporate specialty practices and academia is difficult, but let’s put the difference around 10% of your salary. Therefore, an entry-level private practitioner making $160k would put $16k of their salary towards benefits, whereas an entry-level academic making $120k would put $0 towards benefits. Advantage: ACADEMIA.
Finally, of course, is the absolute salary. This is the basis on which everything depends. On the face, the private practitioner makes more. In some disciplines, like radiology, this gulf can be vast- making $300k in private practice vs. $130k in academia. Most specialties have less of a spread, though. Most academic institutions allow the opportunity for locums. If you are income-motivated, it’s not hard to do a locum for 2-4 weeks a year. These vary in payment, but if you assume $5k/week, you could plan to add add $10k-20k to your salary. Often, travel and living expenses are covered by the institution so, except for taxes, the majority of this income goes to you. I have not heard of private practices offering to send their employees away on locums. Nonetheless, private practitioners will almost always make more. Advantage: PRIVATE PRACTICE.
So let’s do a complete breakdown of a theoretical new married veterinary anesthesiologist. One goes into private practice in San Diego making $160k. Another goes into academia in Pullman, WA making $120k and does 2 weeks of locum to add $10k.
|Private Practice in San Diego CA||Academia in Pullman WA|
|Salary: $160k||Salary + Locum: $130k|
|After-tax: $120k||After-tax: $99k|
|After benefits: $104k||After benefits: $99k|
|COL adjustment: $75k||COL adjustment: $111k|
In the end, your effective take-home pay is actually LOWER in private practice than in academia, even though the starting salary is 33% higher.
All veterinarians should consider the influence of these variables on their effective income, but it is particularly true for specialists. Some specialists practice in low COLA areas (Phoenix, Columbus, OH) and some universities are in high COLA areas (Madison, Fort Collins). The cost of living, the benefits, and the impact of taxes will dramatically affect your take-home pay. In my experience, all of these variables are ignored by specialists talking about private practice vs. academia.
This focus on The Salary as the bottom line, and the only variable of interest, is problematic. Obviously, there are lifestyle and professional interest variables in play. But I rarely hear about those. What gets brought up by residents when they discuss academia vs. private practice? Salary. And the ignorance of finances, benefits, and geographical arbitrage is leading to more residents choosing private practice. If they read Richer Life DVM, understood finance, and really looked at the bottom line, I believe more would choose academia.