One important source of income inequality is people’s occupations. At the low end of the scale we find domestic servants, fast-food personnel, and unskilled service workers. A full-time, year-round employee at McDonald’s or at a car wash might earn $10,000 a year today.

At the other extreme are the high-earning professionals. What single profession seems to make the most money? In recent years it has without question been medical doctors. Physicians had average earnings of $199,000 in 1997, up almost 70 percent since 1986 the source of such vast differences among occupations? Part of the disparity comes from investments in human capital, such as the years of training needed to become a doctor. Abilities also planar role, for example. in limiting engineering  jobs to those who have some quantitative skills. Some jobs pay more because they are dangerous or unpleasant (recall the discussion of compensating differentials in Chapter 13).

And when the supply of labor is limited in an occupation, say, because of union restrictions or  professional licensing rules, the supply restrictions drive up the wagon salaries of that Occupation.

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