First-year medical residents earn a national average of $68,166 per year, according to 2025 data from the Association of American Medical Colleges. That’s roughly $16 per hour when you account for the 60 to 80 hours a week most residents actually work. For someone who spent four years in college, four years in medical school, and graduated with a median debt of $205,000, the pay can feel insulting. The reasons residents earn so little come down to a combination of federal funding structures, legal protections that limit competition, and a system where hospitals hold nearly all the bargaining power.
What Residents Actually Earn
Resident pay increases modestly with each year of training but stays well below what other healthcare professionals make with less education. The 2025 AAMC survey puts average stipends at $68,166 for first-year residents, rising to $73,301 by year three and $81,807 by year five. A seven-year surgical residency tops out around $89,187. These figures have been rising, but growth has consistently trailed inflation, meaning residents are effectively losing purchasing power over time.
For context, nurse practitioners earn a median salary of about $100,910. They enter the workforce years earlier, carry far less debt, and work significantly fewer hours per week. A first-year resident working 70-hour weeks takes home less per hour than many bedside nurses, despite having completed eight years of post-secondary education. The 2024 median first-year stipend was $65,100, meaning a new doctor with $205,000 in student loans has a debt-to-income ratio above 3:1 before interest even enters the picture.
How Medicare Funding Shapes the System
Most people assume hospitals pay residents out of their own revenue. In reality, the federal government foots a large share of the bill through Medicare. Two streams of funding, called Direct Graduate Medical Education and Indirect Medical Education, reimburse hospitals for the cost of training residents. Federal payments range from roughly $38,000 to $150,000 per resident depending on the hospital, its location, and its historical cost structure. The exact amount is calculated using a hospital-specific formula based on what that institution spent on training during a base period years ago, multiplied by its share of Medicare patients.
This matters because the money flows to hospitals, not to residents. Hospitals receive the federal funds, set the stipends, and pocket the difference between what Medicare reimburses and what they pay trainees. Residents generate significant economic value: one analysis in Indiana found that community clinics see annual economic benefits of $200,000 per resident through better care coordination and fewer unnecessary hospitalizations. Yet hospitals aren’t required to report how much revenue individual residents generate or how the GME funds are allocated internally. The lack of transparency makes it nearly impossible to know how much of the federal investment actually reaches trainees.
A Legal Shield Against Wage Competition
In most industries, if every employer in a market used the same system to set wages and prevent workers from negotiating, it would be an antitrust violation. Residency programs do exactly this through the National Resident Matching Program, commonly called “the Match.” Medical students rank their preferred programs, programs rank their preferred applicants, and an algorithm produces binding assignments. Once matched, a resident has almost no leverage to negotiate salary, location, or working conditions.
In 2004, a group of residents challenged this system in court. The class action lawsuit, Jung v. Association of American Medical Colleges, argued that the Match artificially depressed wages by eliminating competition among hospitals for physician labor. Before the case could be fully litigated, Congress passed a provision explicitly exempting the Match from federal antitrust law. That exemption remains in place today. It means hospitals face no legal pressure to compete on salary the way employers do in virtually every other profession. The system is, by design, insulated from the market forces that would otherwise push wages up.
A Frozen Supply of Training Slots
The Balanced Budget Act of 1997 capped the number of Medicare-funded residency positions at each hospital. For nearly three decades, the total number of federally funded slots has remained essentially flat. Until recently, any increases for urban teaching hospitals came only from redistributing existing positions, not creating new ones.
This cap creates a bottleneck. Every year, more medical students graduate than there are funded residency positions available. Because residency training is required to practice medicine independently, graduates can’t simply skip it and go work elsewhere. The limited supply of slots gives hospitals enormous leverage: there will always be enough applicants to fill positions regardless of what they pay. Residents accept low stipends not because the pay is fair, but because the alternative is abandoning a medical career entirely after investing a decade of education.
Why Hospitals Have Little Incentive to Pay More
Teaching hospitals benefit from residents in ways that extend well beyond patient care. Residents staff emergency departments, cover overnight shifts, manage floors, and handle a volume of work that would otherwise require hiring attending physicians or physician assistants at market rates. They do this while also learning, which means hospitals get a workforce and a training mission bundled into one relatively cheap package.
Because federal GME funding is pegged to historical costs rather than current market conditions, hospitals that keep stipends low don’t lose federal money. And because the Match eliminates salary competition, hospitals that do raise pay don’t gain a recruiting advantage. The economic incentives all point in one direction: keep stipends modest, absorb the federal funding, and rely on the captive labor pool the system guarantees.
Unionization Is Starting to Shift the Balance
Resident unions have existed for decades, but organizing efforts have accelerated in recent years. The most visible results are coming from large systems where collective bargaining has produced measurable gains. The University of California system, for example, recently proposed a contract with compounded wage growth of 18.1% over four years for residents represented by CIR-SEIU, with annual increases of 5%, 4.5%, 4%, and 3.5% across the agreement. The deal also consolidated several smaller benefits into a flexible fund that residents can spend at their own discretion.
These gains are real but still incremental. An 18% raise spread over four years doesn’t close the gap between a resident earning $68,000 and the $200,000-plus they’ll eventually make as an attending. What unionization does change is the dynamic: it forces hospitals to negotiate rather than dictate terms, and it creates a public record of what institutions can afford to offer when pressed. As more residency programs unionize, particularly at large academic medical centers, the floor for resident compensation is gradually rising. Whether it rises fast enough to keep pace with inflation and debt burdens is a different question.
The Long Game Residents Are Betting On
The implicit bargain of residency is deferred compensation. You accept years of low pay in exchange for eventual access to physician-level salaries. Primary care physicians earn a median of about $251,578, and specialists earn considerably more. For many residents, the math eventually works out, but “eventually” can mean a long time. A three-year residency delays full earning potential until the early 30s. A seven-year surgical residency pushes it closer to 40. Meanwhile, compound interest on six-figure student loans doesn’t wait.
The system persists because each individual resident has strong personal incentives to endure it. Walking away means forfeiting the investment already made. Staying means tolerating a few more years of low pay for a significant long-term payoff. But the fact that residents ultimately earn high salaries as attendings doesn’t explain why the training period needs to pay so little. That’s a function of policy choices: capped funding, antitrust exemptions, opaque hospital finances, and a matching system that removes the one tool workers in every other industry use to improve their pay, the ability to say no.