(NYTIMES) – I know money can’t buy you love, but wouldn’t it be nice to have enough money to buy whatever else you want?
The most likely way to become rich is to try to get into a line of work that’s hard to get into, particularly if the people in that profession are the ones setting the rules for entry.
For example, if you want to become rich, tech may be a less likely way than you suppose. In 2019, about 2.4 per cent of software developers made it to the top 1 per cent of earners.
As economist Jonathan Rothwell points out in his book, A Republic Of Equals, as at 2015, there were nearly eight times as many software developers in the United States as there were dentists, but nearly as many dentists in the top 1 per cent as there were software developers.
The odds are also against you if you go into the engineering professions. Just about 2.2 per cent of electrical engineers made it to the top 1 per cent, and just about 3.3 per cent of chemical engineers, and about 0.8 per cent of industrial engineers.
The arts aren’t so hot either. Even just among people who manage to make a living as an actor, a director or a producer, just about 2.1 per cent made it to the tippy top.
What’s wrong with all these professions? That’s simple: These are highly competitive, innovative and productive industries where global competition drives down earnings.
You want to go into a profession protected by strong professional organisations and state legislators who will shield you from global competition and productivity growth.
So what profession is most likely to get you rich? Medicine! You get to save lives and make bank all at once! One-third of doctors overall, including about 58.6 per cent of surgeons, are in the top 1 per cent of earners. There are more doctors and surgeons in the top 1 per cent than any other job category.
According to Dr Rothwell’s book, in Spain, Sweden and Iceland, doctors earn twice as much as the average worker, but in the US physicians and surgeons earn nearly five times as much.
Why is that? There are huge barriers of entry into that profession – including, of course, the strenuous education required.
The number of medical school students is limited. In 2018 to 2019 in the US, only 41 per cent of applicants who applied to medical school actually got into one. Plus, a 1997 federal law capped the number of residency slots that Medicare funds would support.
It typically takes a minimum of 11 years of difficult training to become a doctor, costing hundreds of thousands of dollars.
Once you’re a doctor, you are protected by state laws from competition from lower-cost workers. Dr Rothwell cites research suggesting that nurse practitioners and dental hygienists can perform many duties now done by doctors and dentists, at lower cost.
If you’re squeamish around blood, you can go into law.
Census data for 2019 shows that about 14.5 per cent of lawyers are in the top 1 per cent of earners. And for some of the same reasons: high barriers to entry, limits on competition from less costly alternatives and limits on innovation. For example, in most states in the US, it’s illegal for a non-lawyer to own a law firm.
If that doesn’t float your boat, try getting a job in venture capital, hedge funds or private equity. Don’t go into consumer banking. Companies with low-fee options, like those introduced by Vanguard, can’t pay the big bucks.
The real money is in managing those higher-end investment vehicles to which only rich people and institutions have had easy access.
For reasons that seem to mystify everyone, pension fund managers are willing to pay ridiculously high fees to people in those professions, so there are tonnes of money to be made. About 5 per cent of financial managers are in the top 1 per cent of earners.
Once you’ve made some money, there’s one more way to get richer. Buy a home in a neighbourhood with a lot of zoning restrictions.
For example, 84 per cent of the land in Charlotte, North Carolina, and 94 per cent of the land in San Jose, California, is zoned for detached single-family homes. These restrictions keep the supply of housing low and jack up the value of homes for people wealthy enough to already own one.
My main message is that if you want to get rich, don’t invent a new and useful product, start a company and try to sell it. That seems risky. Put the effort into entering a clubby line of work in which legislators and professional associations are working to make you rich. It’s easier!