The New Zealand Herald reported last week:
More than A$500,000 ($553,000) and a free house haven’t been enough to attract a doctor to a small town in rural far-north Queensland, leaving residents forced to drive two hours to receive treatment.
McKinlay Shire Council in Julia Creek - 600 kilometres west of Townsville - has offered an enviable package for a GP looking for a career change in their tight-knit community.
The job includes a salary of up to A$513,620 and a rent-free house on a decent-sized block of land, but no doctors have taken up the call yet.
As I've noted before (see here and here), the job of rural doctor appears to subject to a very large and persistent compensating differential. What does that mean?
Wages differ for the same job in different firms or locations (such as the difference between a rural GP and an urban GP). Consider the same job in two different locations. If the job in the first location has attractive non-monetary characteristics (e.g. it is in an area that has high amenity value, where people like to live), then more people will be willing to do that job. This leads to a higher supply of labour for that job, which leads to lower equilibrium wages. In contrast, if the job in the second area has negative non-monetary characteristics (e.g. it is in an area with lower amenity value, where fewer people like to live), then fewer people will be willing to do that job. This leads to a lower supply of labour for that job, which leads to higher equilibrium wages. The difference in wages between the attractive job that lots of people want to do and the dangerous job that fewer people want to do is called a compensating differential.
Living and working in a remote rural area might seem idyllic to some people. However, what you gain in rural lifestyle amenity is offset by the loss of urban amenity. Given that compensating differentials for rural doctor jobs appear to be so pervasive, is clear that doctors on the whole perceive the loss of urban amenity to more than offset the gain in amenity from the rural lifestyle. That's why these rural doctor jobs have to pay so much in order to attract doctors willing to do them.
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