Why is there a significant difference in the pay of physicians and construction workers?

Question

What will be an ideal response?

Answer 1

The difference can be explained largely in terms of noncompeting groups. The market for physicians is different than the market for construction workers. In the case of physicians, entry into the profession is severely restricted which makes the supply small relative to the demand. The job requires high mental ability and extensive education and training. The education and training is expensive both in monetary terms and in terms of the number of years that a person must devote to it (forgone earnings). Licensing requirements and the limited number of students admitted to medical school also keep the pool of potential physicians small. The demand for physician services, however, is great and expanding. Thus, the equilibrium wage for physicians will be high.
For construction workers, entry into this profession is somewhat restricted by unions, but the barriers are not nearly as high as for physicians in terms of mental ability, financial capability, or time required for education. The supply of construction workers, therefore, will be greater relative to the supply of physicians. The demand for construction workers may be great, but it can also be weak at different times of the year. Thus, with greater supply and weaker demand, the equilibrium wages of the construction workers will be lower than physician wages. Restrictive unions cause the gap to be less than it would be otherwise.