Thursday, August 28, 2014

Are Doctors or Lawyers Richer?

Careers in medicine and law are known for high levels of educational credentials and high levels of income. But, which pays more?

The answer, as most people know, is doctors. Doctors, according to CNBC, are paid about $160,000 to $200,000 on average (depending on speciality) compared to to about $130,000 for lawyers. Stark difference indeed.

Not surprisingly, going into the medical field is more likely to get you rich than going into the legal field. 21% of doctors make the top "1%" of earners compared to 12% of lawyers.  Both fields are pretty wealthy, but doctors far outpace lawyers.

So, to answer the question posed in the title, doctors are clearly richer than lawyers. That truth, however, may mask a more complex reality.

Being a doctor may be a better path to being rich, but it may not be a better path to being super rich. That is to say, doctors are richer than lawyers, but rich doctors may not be richer than rich lawyers.

Luckily, we have data that can help shed some light on the differences between the rich doctors and rich lawyers. Bradley Heim, Adam Cole, and Jon Bakija did a study on the occupations of the "1%". Unfortunately, the data only reaches up to 2005, but, for the purposes of this analysis, that shouldn't be a major problem.

What does the data show?

Just as indicated earlier, doctors are more common than lawyers in the "1%". In 2005, doctors made up 15.7% of the richest 1% compared to only 8.4% for lawyers. But, the question I am asking here is whether or not doctors or lawyers that are already in this 1% make more.

The answer is: Lawyers. Rich lawyers make more than rich doctors. Some simple calculations show that both lawyers and doctors in the top 1% make less than the average income in the top 1% (because CEOs and Financiers make up a big portion of this group). But, doctors in the 1% make 78% of the average while lawyers in the 1% make 85% of the average. This means that rich doctors only make 92 cents on the dollar of what rich lawyers make. Not a huge difference, but quite significant.

The difference is even greater among the super rich: the top 0.1%. Doctors in the 0.1% make about 60% of the average income in 0.1% while lawyers in this group make about 73% of the average income. This means that, in the top 0.1%, doctors make 82 cents on the dollar of what lawyers make.

The conclusion?

Doctors are richer than lawyers, but rich lawyers are richer than rich doctors. If you're goal is a high 6 figure salary, medicine is a better choice for you. If you are obsessed with great riches, however, law might be a better choice than medicine. Of course, this is all relative. Both medicine and law are far less likely to bring great wealth than finance and corporate management.