The Structural Determinants of Doctor’s Salaries
By Worku Aberra
The determinants of doctors’ salaries in Ethiopia fall into two broad categories—political and non-political—though the distinction is fluid. Political considerations are the dominant factor. Among the most immediate are fiscal and budgetary pressures.
Revenue Constraints and Budget Priorities
Fiscal limitations have been cited by the government as the reason for low public-sector pay. The Ethiopian government, officials have said, has limited capacity to pay for the salary increases. It is true that Ethiopia collects far less per capita tax revenue than peer countries, notably Kenya, restricting its ability to finance essential services, even when the political will exists.
Kenya maintains a tax-to-GDP ratio of 17–18%, while Ethiopia’s ratio hovers around 9–10%. This fiscal gap, it can be argued, limits the budget allocated to healthcare and compresses doctors’ salaries. The low level of tax revenue in Ethiopia reflects not only the country low GDP but also widespread inefficiency and corruption in tax collection, according to the World Bank .
The constraint on healthcare funding, however, stems not from the government’s relatively low tax revenue but from the way the budget is allocated. Over time, the share of public spending devoted to healthcare has declined sharply. While government expenditure on the military and vanity projects has increased —state resorts among them—spending on basic health services have progressively declined.
Public health spending fell from 3.48% of GDP in 2020 to 3.21% in 2021—below the Sub-Saharan African average of 5.7%. As of 2022, Ethiopia’s health expenditure is estimated at 2.85%, according to the World Bank, almost half of the 5% minimum recommended by the WHO.
Bureaucracy and Wage Compression
Another factor behind the low salaries of doctors is Ethiopia’s bloated bureaucracy and distorted wage structure. The country maintains a large civil service workforce, driven in part by ethnic patronage, which has produced overstaffing and inefficiency. Meanwhile, the private sector remains small: as of 2021, only 14.91% of workers are employed in the private sector. The imbalance compels the public sector to absorb more workers than it can sustain efficiently.
To contain payroll costs within the expanding public sector, the government employs a policy known as wage compression, which narrows salary differentials across positions. As a result, doctors earn only marginally more than low-level employees, regardless of their training, expertise, or responsibilities. This structure leaves doctors underpaid, demoralized, and unable to deliver consistent care.
Monopsony in the Health Labor Market
Another structural factor behind low salaries is the government’s role as a monopsonist employer in the healthcare labor market. A monopsony in the labour market refers to a situation in which a single employer dominates hiring, allowing it to set wages without competitive pressure.
The vast majority of physicians in Ethiopia work in public hospitals, while the private sector remains too small to absorb the medical workforce. According to a 2009 study, only 5.8% of health workers are solely employed in the private sector, though about 15% of general practitioners and nearly 40% of specialists engage in full-time private work through dual employment.
In 2023, a policy discussion led by the Ethiopia National Center of the Africa Health Observatory Platform on Health Systems and Policies (AHOP), in partnership with the Federal Ministry of Health and the World Health Organization, confirmed that the public sector provides approximately 80% of tertiary healthcare. Private institutions remain marginal players.
Other studies confirm the dominance of the public sector. According to a 2019 assessment by the Global Financing Facility, only 62 of Ethiopia’s 364 hospitals—roughly 17%—are privately owned. A 2021 study of 172 facilities found that private hospitals account for just 13% of surgical beds nationwide, underscoring their limited capacity to deliver comprehensive care. This structural imbalance reinforces the state’s monopsonistic control. With no alternative employer, the government faces no significant risk of losing physicians to competitors; this keeps wages low.
In such a system, wages reflect politics rather than economic reality or social value. Salaries are set administratively, without regard for skill, workload, or contribution. This means, even life-saving care receives only what the government allocates, not what its social value justifies.
In short, Ethiopia’s private sector is too small and disorganized to counter the state’s dominance. While some specialists work in private settings, they represent a narrow segment of the profession. With no viable alternatives, doctors remain confined to a state-controlled system.
Licensing Restrictions, Mobility, and Weak Union
Another major structural factor contributing to the low salaries of doctors is Ethiopia’s licensing system, which restricts international recognition of medical credentials. By contrast, countries such as Kenya, Ghana, and Egypt permit physicians to take formal leave or obtain short-term contracts abroad—particularly in the Gulf states—where they earn higher incomes, acquire new skills, and return with credentials that enhance their domestic value. These cross-border opportunities can lift domestic wages. In Ethiopia, that dynamic is absent. State-imposed licensing restrictions isolate the medical workforce from global labor markets, limit professional mobility, and weaken doctors’ bargaining power.
Another critical factor behind low pay is the absence of strong professional representation. The Ethiopian Medical Association (EMA), the main body for doctors, lacks the independence and institutional strength to advocate for higher wages. Unlike medical unions elsewhere, it operates under government control.
Though not formally divided along ethnic lines, the EMA operates within a system of ethnic federalism that undermines national cohesion, weakens collective action, and fragments professional solidarity. The EMA, like many institutions in Ethiopia, lacks operational autonomy. Government control has left it unable to influence salaries or working conditions.
The 2025 doctors’ strike was launched by a grassroots coalition—organized through social media campaigns like #HealthWorkersMatter, outside formal institutions. The EMA later offered support, but the leadership came from outside its ranks. During the current strike, although it has condemned the detention of doctors and called for a government response, its influence is largely symbolic.
The Confederation of Ethiopian Trade Unions (CETU), the national umbrella for organized labor, has little presence in the healthcare sector. Union density in Ethiopia is also low, only 14% of employees were unionized in 2023. The limited degree of unionization across professions restricts the possibility of coordinated labor action.
Legal restrictions compound the problem. Civil servants, teachers, and doctors face formal limits on forming or joining trade unions. These constraints have suppressed the development of independent associations capable of representing doctors’ interests.
Salaries and wages are, to a large extent, a function of unions. In the US, physicians earn high wages not only because of economic conditions but because the American Medical Association operates as a powerful union. It negotiates compensation, shapes policy, and defends the profession’s economic interests. As stated earlier, the EMA cannot play that role. It lacks cohesion, political influence, and institutional autonomy.
Inflation and Macroeconomic Instability
The final structural factor behind low salaries is Ethiopia’s macroeconomic instability—especially inflation—which has steadily eroded real wages in the public sector. Nominal wages have barely increased over the last decade, while rising prices have sharply reduced the purchasing power of workers, including doctors. Although the government announced salary adjustments for civil servants following the devaluation of the birr, the increase in nominal income has barely kept pace with surging inflation.
In 2022, Ethiopia’s inflation rate officially reached 33.56%—more than double the government’s 10% target—and remained at 28.75% in 2023. As of April 2024, it stood at 27.7%, one of the highest in Africa and globally. This persistent inflation has made the cost of living soar while salaries remain fixed.
Multiple factors drive inflation in Ethiopia: a growing fiscal deficit financed through money creation, public spending on vanity projects, supply bottlenecks, market power, and chronic depreciation of the birr. Together, they have produced a persistent inflationary environment without salary indexation for professionals like doctors. Inflation has not only impoverished physicians; it has deepened the retention crisis and eroded professional dignity within the Ethiopian healthcare system.
In summary, the low salaries of doctors in Ethiopia stem from structural factors embedded in the political system. Addressing this problem requires more than short-term fixes. Without reforming the institutions that shape budget priorities, suppress collective bargaining, and limit accountability, doctors will remain underpaid. Improving their compensation—and the broader economic wellbeing of Ethiopians—depends on confronting these systemic barriers directly.
Worku Aberra is a professor of economics at Dawson college, Montreal, Canada.
Editor’s Note : Views in the article do not necessarily reflect the views of borkena.com
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