Pay gap between foreign-born and native-born doctors in the United States

ABSTRACT

Foreign-born doctors are an integral part of the U.S. labour market for doctors. About 29% of physicians, 24% of dentists, 16% of optometrists and 11% of podiatrists are not born in the United States. This study investigates whether, on average, there is a difference between the earnings of foreign-born doctors and their native-born counterparts, all else equal. The American Community Survey Data from 2006 to 2017 and two measures of doctors’ earnings: wage (and salary) income and total income (includes wages/salaries, business, investment income, etc.) are used. The results indicate that all else constant, all foreign-born doctors earn significantly (p < 0.01) less wage than native-born doctors for the first 5 years of their stay in the U.S. The wage gap decreases with their length of stay in the U.S. After 10 years of stay, foreign-born male doctors start to earn significantly more than their native-born counterparts (p < 0.05). However, when total income is considered, all foreign-born doctors earn significantly (p < 0.01) less than their native-born counterparts for up to 20 years of stay in the U.S. The magnitude of the total income gap is larger than that of the wage gap. All results remain robust even after ability is controlled for.

KEYWORDS:

• Doctors
• high-skill immigration
• earnings
• wage-gap
• foreign-born

JEL CLASSIFICATION:

• J00
• J44
• J71

Acknowledgements

The authors would like to thank two annonymous referees and Imam Alam for their helpful comments. The authors also thank Hasina Jalal for research assistance.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The median pay is at least $156,240 and $111,790 per year for dentists and optometrists, with a 7% and 10% occupational growth rate respectively.

² The notations closely follow Heckman, Lochner, and Todd (2003).

³ Mincer’s model has been widely used to estimate returns to schooling (see for example, Smith and Welch 1979; Krueger 1993) and measure wage gaps between two groups, for example, male-female wage gaps (Mincer and Polachek 1974).

⁴ See for example Chiswick 1978, Borjas (1985, 1995, 2014, 2016).

⁵ The final data set might be considered a ‘selected’ sample, introducing the possibility of sample selectivity bias. Because investigating the relationship between the immigration status of the doctors and their earnings, is the objective, selectivity is not a problem for the study, given the specified population.

⁶ A full listing of the occupations included in each category could be found in the occupational codebook on the IPUMS website. https://usa.ipums.org/usa/volii/c2ssoccup.shtml.

⁷ The samples include 10,094 individuals in 2006; 10,478 in 2007; 10,354 in 2008; 10,677 in 2009; 10,608 in 2010; 10,585 in 2011; 10,652 in 2012; 10,786 in 2013; 10,754 in 2014; 10,928 in 2015; 11,154 in 2016; and 11,551 in 2017.

⁸ The names of the variables are written in capital letters.

⁹ Logs of zero and negative numbers are not defined. However, minimum INCWAGE for approximately 10% of the doctors is reported to be zero; so, a constant of ‘1’ is added to all INCWAGE values. By the same token, the minimum TOTINC for 0.13% of the doctors is reported to be 0 or negative. So, and again following convention, a constant to TOTINC is added, which is sufficient enough to bring the minimum TOTINC to ‘1.’ After all, adding a constant to all values of a variable simply shifts the distribution without affecting any other properties of the distribution and the regression coefficients.

¹⁰ Among the Asian doctors most are Indians followed by the Filipinos, Chinese, and Pakistanis.

¹¹ www.mcat-prep.com/mcat-scores/. Accessed on 29 March 2019.

¹² Most foreign-born doctors who are educated outside the U.S. do not take MCAT. As discussed in the Appendix, all doctors take Step 1 and Step 2 USMLE. The USMLE by the state could not be found, so could not be used as a control variable. However, research by Dannon, Paulucci, and Violato (2007); Cuddy et al. (2013) and Burns and Garrett (2015) indicate that there is significant correlation between MCAT scores and the USMLE scores. For that reason, using MCAT as an ability control variable could be justified and serves the purpose.

¹³ The results from USMLE Step 1 and Step 2 scores of the students are used to ‘match’ with a residency program in their preferred speciality program through a competitive process.

¹⁴ (Source: https://www.ecfmg.org/certification/requirements-for-certification.html accessed on 12 December 2019).