How well paid are economics majors? Payscale.com survey has some answers

As recently reported by Joe Light (Engineering, Computer-Science Pay More Than Liberal Arts, Wall Street Journal, October 25, 2010),
Payscale.com has just come out with its 2010-11 College Salary report. The following chart is from the Degrees That Pay You Back tab.

Best Undergrad College Degrees By Salary

Methodology Annual pay for Bachelors graduates without higher degrees. Typical starting graduates have 2 years of experience; mid-career have 15 years. See full methodology for more.

Wow! Econ grads made the top ten!

And what sort of jobs do econ majors do? Check out the Popular Jobs By Major tab, which has the following chart:

Popular Jobs for Economics Degree

Methodology Jobs ranked by popularity among graduates. Annual pay for Bachelors graduates without higher degrees from all colleges. See full methodology for more.

Still not sure what major to choose?

How well paid are econ majors? NACE fall 2010 survey results

The National Association of Colleges and Employers (NACE) has recently published its Fall 2010 Salary Survey report on starting salary offers to new college graduates, in this case the Class of 2010 bachelor’s degree graduates. The full report is available only to paying members of NACE. But some of the report's findings -- summarized below -- are available at this web site of the Worcester Polytechnic Institute.

disciplines	average starting salary offer ($)
computer science	60,473
computer engineering	60,396
chemical engineering	60,396
electrical/electronics engineering	59,512
aerospace engineering	58,208
mechanical engineering	58,110
industrial/manufacturing engineering	57,396
bioengineering and biomedical engineering	53,416
information sciences and systems	52,530
economics	51,698
civil engineering	51,321
management information systems	48,932
mathematics (including statistics)	48,499
business administration/management	43,991
marketing	41,670
chemistry	39,404
history	38,731
psychology	32,260

As in the fall 2009 report, engineering grads lead the pack. And econ majors are doing pretty well, thanks.

Genes, Longevity, and Income Inequality

Reporting on a study recently published in Science, Nicholas Wade of The New York Times writes that the study's authors "say they have identified a set of genetic variants that predicts extreme longevity with 77 percent accuracy." (See Wade's report here and a report by Robert Lee Hotz of The Wall Street Journal here.) So, we may soon be able to find out whether we can expect to live to be a hundred, barring accidents or extreme disregard for healthy living.

Should this scientific breakthrough be of interest to an economist from a purely economic point of view? How, if at all, would economic activity be affected if we could know how long we'd likely live?

Prof. N. Gregory Mankiw of Harvard has in his blog raised a bunch of interesting questions on how health insurance companies and financial firms selling annuities may use gene-based forecasts of a client's longevity.

In this post I will discuss a possible link between gene-based longevity forecasts and economic inequality. I fear that the steady rise in economic inequality that has been seen in the United States since the seventies may worsen when people are able to obtain reliable forecasts of their longevity.

Why, you may ask, should reliable longevity forecasts lead to higher economic inequality? Simple: Because there is a link between how long we can expect to live and how willing we would be to invest in ourselves.

For many of us, spending a lot of time and money on education is a bit of a drag. Sure, some of us enjoy going to school, listening to lectures, doing the homework assignments, and taking all those tests. But for most of us education is worth it simply because all that up-front sacrifice of time and money can be expected to lead after graduation to better jobs, higher salaries, and more desirable mates.

Similarly, although some of us may actually enjoy exercise for its own sake, most of us endure the tedium of exercise only because it may in due course lead to better health, flatter abs, and perhaps a more fulfilling sex life.

In short, these kinds of investments in what economists call human capital require us to make sacrifices up front in exchange for delayed gratification. If the future payoff is larger than the current sacrifice, we make the investment. Otherwise, we don't. Economists believe that investments in human capital are driven by this cold-blooded comparison of costs and benefits.

And this is where longevity enters the picture. Someone who knows that she will have a long life will naturally expect to enjoy the fruits of an early investment in human capital for an extended period. Consequently, she will very likely invest heavily in her education. Conversely, someone who finds out that he has a mere fifteen years to live will probably not want to spend eight years and a huge amount of money to earn a medical degree.

In other words, those with the genes for a long life will invest heavily in human capital and enjoy long, well-paid, and fulfilling lives. Those without the genes for a long life will invest less in human capital and have shorter, poorer, and ultimately less fulfilling lives. In this way, economic inequality will probably increase as a result of improved gene-based longevity forecasts.

(Before going any further I need to make a slightly wonkish detour. Strictly speaking, the introduction of a new inequality-raising factor into the mix of causal factors that affect inequality does not guarantee an increase in inequality. It all has to do with what statisticians call correlation or covariance. Let's consider a world with just two people, Al and Betty. Suppose Al is rich and Betty is poor. Now assume scientists—from another world!—do their genetic tests and reveal that Betty has the genes for long life and Al doesn't. Following the logic of the paragraphs above, Betty will get richer and Al poorer, thereby actually reducing inequality. So, you see that merely introducing a new causal factor that by itself raises inequality does not guarantee an increase in overall inequality. However, as there is no presumption one way or the other about how the effect of longevity information on inequality is related to the other factors that also affect inequality, I will loosely assume that the causal chain described in the previous paragraph does indeed raise inequality.)

This rise in economic inequality will be less pronounced in countries—such as those in Western Europe—where education at all levels is paid for by the government. In such a country, a person who finds out that he will not live long—and therefore will not benefit for long from education—will have less reason to quit school because, after all, the fees are being paid by the government. But even here, the student does bear some of the costs of education such as the tedium of attending the lectures and the time spent studying, doing homework, etc. So, even in these caring societies a person with not long to live will be unlikely to invest heavily in his or her human capital.

Note also that when the government pays for education, the longevity-related dilemmas simply get shifted from the individual to the state. Genetic information on longevity now becomes an ethical dilemma for the state. Should the government spend tons of money educating someone who will have a short life? Economic efficiency considerations would say "No." But ethics is a whole different ball of wax on which economists have little to say. An efficiency-driven society would benefit greatly from gene-based longevity forecasts, because such a society would be able to allocate its limited resources efficiently instead of 'wasting' it on costly investments in short-lived people who will not be around long enough to benefit very much from the education. But again, few societies will ignore the ethical dilemmas and choose to be guided entirely by efficiency.

Apart from government funding of education, another factor that will restrain the rise in economic inequality resulting from the availability of gene-based longevity forecasts is what economists call depreciation.

I have a terrible memory. I have to read a book or journal article over and over and over in order to retain an understanding of the main ideas therein. In econospeak, the depreciation (or wear and tear) rate of my human capital is very high. If we were all as memory challenged as I am, longevity differences would not lead to big inter-personal differences in human capital investment. You may live longer than I, but since both you and I quickly forget what we learn today, we will both benefit to the same extent from what we learn today. Therefore, you will have no greater incentive to invest in education than I. Therefore, our longevity differences will not add to any inequality in our incomes.

Let me end this post by making a brief pronouncement on something I know little about: biology. The availability of gene-based longevity forecasts may have big effects on humankind through Darwinian natural selection. To the extent that longevity genes are heritable, those who are lucky enough to have the long-life genes will be more desirable as mates and will enjoy greater reproductive success. Those without the long-life genes may end up decimated by a lack of mating opportunities (unless they have some compensating attribute). And for such people, it will not help to hide one's genetic information. Those who do have the long-life genes will happily advertize their genetic information. So, anyone concealing their information will quickly be branded a short-lived person and shunned by potential mates.

Life can be cruel!

Indian Railways Coolies

Who would have thought that within the space of just a few months NPR would broadcast two reports on how startlingly overqualified some lowly employees of Indian Railways happen to be?

In my previous blog post I had discussed an April 1, 2010 report on Morning Edition on Indian Railways ticket collectors who, in their recruitment exam, are asked questions such as "Who won the Australian Open Women's Singles Tennis title in 2002?" and "What's laughing gas made of?"

Now we have a report by Raymond Thibodeaux of Marketplace Morning Report that cites the case of an Indian Railways coolie (or porter) who has a master's degree in Sanskrit! Thibodeaux helpfully points out that coolies earn $300 a month, which is five times the national average, get free medical care, and enjoy job security that is rare in private sector jobs. Not surprisingly, Indian Railways receives 30 applications for every coolie job it advertizes, and among those applicants are people like our Sanskrit pundit.

Now, why would Indian Railways sweeten the coolies' compensation package to such an extent that there are 30 applicants for every coolie job?

One possibility is that Indian Railways has learned from bitter experience that in general 29 of every 30 applicants are not qualified to do a coolie's job and that consequently to get one qualified applicant (for one vacancy) thirty people have to be induced to apply.

But, seriously, how likely is this? The requirements that applicants must meet are pretty clear: applicants must pass "a medical exam, a police background check, and a test to show that they can carry nearly 90 pounds on their heads for the length of two football fields." Why waste time applying if you know exactly what's expected of you and that you'd never make it? No, it is almost certain that quite a few of those 30 applicants are qualified to be coolies. For argument's sake, let's assume that for every coolie job advertized, there are 30 applicants of whom 15 are qualified to do the job.

Indian Railways needs just one qualified applicant per vacancy. Why then is its compensation package so generous that there are so many—fifteen, by my assumption—qualified applicants per vacancy? If the compensation package is gradually reduced to what economists call the market-clearing level, Indian Railways will get the qualified coolies it needs and the Indian taxpayer (who subsidizes Indian Railways) will save a bundle.

So, to return to my question, what's stopping Indian Railways from cutting coolies' compensation packages to the market-clearing level when doing so would have no downside for the Railways and a potentially huge upside for the taxpayer? The answer is simple: India's public sector employees' unions.

I have written at length about the tactics used by these unions to rip off the nation—see here, here, and here. It is a pity that NPR's reporters notice the incongruities in the Indian public sector but are either unable or unwilling to shine a light on the roots of the problem.

Indian Railways Ticket Collectors

National Public Radio's Morning Edition, of April 1, 2010, presented an amusing report from Philip Reeves, its New Delhi correspondent, on how Indian Railways recruits ticket collectors.

Here are extracts from the online transcript of the report at http://www.npr.org/templates/story/story.php?storyId=125441557:

REEVES: Getting a job on India's railways is much harder than you'd think. The other day, I met some young Indians trying to become ticket collectors. They first have to pass what are known as the railway exams, so they've gone back to school. ... They come here every day, to a stark and grubby classroom in a private tuition center tucked in a back alley in New Delhi. The students scribble away in their dog-eared notebooks as the teacher poses one of those brain teasers dreaded by everyone except math geeks.

Having established that thousands of desperate people apply for every ticket collector position -- "because of the job security and the perks" -- Reeves moves on to some of the questions that are asked in the Railway Recruitment Board's tests for ticket collectors:

REEVES: What's the deepest place on Earth - the Caspian, Aegean, Dead Sea or Black Sea? What's the capital of Turkey? And who won the Australian Open Women's Singles Tennis title in 2002?

Now, you can also buy books in India that contain sample papers for the railway exams, and I've got one here. This is for a ticket collector's job. Question 67: What's laughing gas made of?

Several listeners commenting on the NPR web site were convinced that all this was an April Fools joke; one smart aleck took the reference to laughing gas as a sly hint from Reeves.

Unfortunately, Reeves is not kidding. Just google "railway recruitment board ticket collectors test questions" and you will see that an entire industry has sprung up surrounding these tests. For example, this site has the laughing gas question. This one has the Australian Open question.

I found other humdingers: Minus 40 degree centigrade is equal to _____ degree Fahrenheit; What is the value of XC (Roman Number)? Geostationary orbit is at a height of ___? Which of the following is the highest plateau in the world?

And the questions on Indian history made my head spin, even though I can claim -- with unimpeachable justification -- to have had a non-substandard Indian college education.

(At the risk of being slightly off point, I felt that the language skills of the question setters -- or, possibly the online tutors -- left something to be desired:

Which of the following gases is filled in a balloon? (1) Helium (2) Hydrogen (3) Bromine (4) Oxygen

Focus on the image eye is adjusted through ____ (1) Retina (2) Iris (3) Comea (4) Lens

Maximum oil can be extracted from _____ (1) Sunflower (2) Groundnut (3) Mustard (4) Cardamom

Nose starts bleeding when one climbs up mountain due to ____ (1) low pressure (2) high pressure (3) height (4) None of these

Africa occupies which part of the earth? (A) 1/3rd (B) 2/3rd (C) 4/5th (D) 1/5th. etc.)

Readers will immediately see that these questions have little or nothing in them to test a person's ability to be a ticket collector. But that by itself is not an argument against asking these kinds of questions. Labor economists understand that a job applicant's ability to answer an apparently irrelevant question may signal his or her innate ability, when there is no direct test for that ability.

But, honestly, not even an indulgent interpretation of this signaling theory can explain why applicants for an Indian Railways ticket collector's job are being asked these questions. The true reason is that these jobs pay -- in wages, benefits, and job security -- far more than what economists call the equilibrium wage or the free-market wage.

The equilibrium wage is that wage -- loosely interpreted to include the monetary value of non-wage benefits and job security -- at which the number of job applicants is equal to the number of job vacancies: i.e., supply equals demand. When the wage exceeds the equilibrium level, supply exceeds demand: too many applicants chase too few jobs. In such a situation, you need a quasi-legitimate way of bestowing a tiny number of jobs upon the hordes of applicants. And that's what explains all those questions about geostationary orbits, the Roman numbering system, the Australian Open, etc.

Announcing a set of minimal qualifications and holding a lottery would have been more honest and more efficient -- because fewer resources would have been wasted on test prep and the industry that has developed around it. But appearances matter: a lottery just wouldn't look right.

But even if Indian Railways had recruited ticket collectors through lottery, another question would remain: Why are these jobs so damn attractive in the first place? Why couldn't the wages and benefits be reduced to a level closer to the equilibrium or free-market wage? There would still have been at least as many qualified applicants as vacancies, and the Indian taxpayer would have saved some money. Why must job security be as high as it apparently is? Is every ticket collector in Indian Railways a model employee, a freaking saint? Why can't the Indian taxpayer receive true assurance that his or her money will not end up paying the salaries of lousy or venal public employees, that all such creeps will be fired?

The answer has to do with the immense power of the public employees' unions. They can bring India to a halt at any time by arranging crippling strikes throughout the country. The Indian public sector is TBTA: too big to be held accountable. This is why public sector pay and job security levels are stratospheric, relative to private sector levels. This is why there are thousands of applicants for each ticket collector's job. This is why the ticket collectors' test asks who was the British viceroy when the Indian Legislative Councils Act of 1909 was enacted (Lord Minto, apparently, if you must know).

The public sector employees' unions are an absolute blight on India. Indian taxpayers suffer, because their money is wasted. The Indian poor suffer too, because the multitude of government development schemes, even when well intentioned, are implemented with utter disregard for the needs of the people. This happens because the public employees responsible for plan implementation simply aren't accountable. Teachers get paid, but they don't show up to teach. And they can't be fired. The unions have made sure of that.

Check out Fire and Fumes Can't Drive Indians From Hellish Village by Geeta Anand, The Wall Street Journal, March 31, 2010, for an illustrative report. The residents of Bokapahari in Jharkhand state live in a hellish environment. The government spent millions of dollars building apartments to relocate them. But now that the apartments are ready, the Bokapahari are refusing to relocate! The public employees in charge of this development scheme never bothered to talk to the Bokapahari people. They simply went ahead and built the apartments, assuming that the Bokapahari would relocate!

Now, do you think the geniuses in charge of this colossal bungle will be held accountable? Do you think they will be fired? If you do, there is a bridge in Jharkhand that I would like to sell you.

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“Bengali Bridal Diaspora”

Although I was born in Philadelphia, I spent the first twenty-two years of my life growing up in Calcutta (now Kolkata), the capital city of the Indian state of West Bengal. Consequently, I retain an abiding long-distance interest in the community of Bengalis, the people of West Bengal. This interest drew me to an interesting article in the January 30, 2010 issue of the Economic and Political Weekly: “Bengali Bridal Diaspora: Marriage as a Livelihood Strategy” by Ravinder Kaur, a sociologist at the Humanities and Social Sciences department of the Indian Institute of Technology, New Delhi.
Here are some excerpts from Prof. Kaur’s article:

My observations and research show that Bengali brides are to be found in almost all parts of the country today, especially in the northern region. …

While cross-regional and cross-cultural marriage appears to be occurring more often in general … many more such brides happen to be Bengali who seem to be migrating to far-flung and culturally strange, rural destinations away from their own homeland. …

There also seems to be a long history of Bengali women migrating out (or being pushed out) for marriage. …

The question then is – what are the underlying reasons for this Bengali bridal diaspora? Or, what in the language of traditional migration studies is the “push factor” behind Bengali women marrying outside their own state and culture? What compels Bengali parents to give their daughters in marriage, often over long distances and into regions and families where they have no prior social networks and where daughters, being cultural and social strangers, will consequently find little support if they have difficulties with their marital families?

Prof. Kaur points out that the sex ratio—or, the number of females per 1000 males—is lower in the northern Indian states of Haryana (861), Punjab (874), and Uttar Pradesh (898) than in West Bengal (934), but chooses not to emphasize this as the underlying cause of the Bengali Bridal Diaspora phenomenon. Instead she implicates higher relative poverty and higher relative demand for dowry in West Bengal. Prof. Kaur shines a harsh light on the social consequences of West Bengal’s high relative poverty:

Bengal remains one of the poorest states in the country despite land reform and a socially committed state government which has ruled in continuity for nearly three decades. More than 40% of people remain below the poverty line, signalling the failure of development and the precariousness of livelihood for large numbers of families, especially their female members. Data shows that most women marrying out are from poor rural or urban working class families. … They are reduced to marrying men who are not exactly prosperous. … In the bride-receiving societies, the perception is that such men could not find local brides because they did not have sufficient land or were jobless. Given the shortage of local brides in Haryana and Punjab, such men are unable to compete in the local marriage market and are forced to look outside the state – and West Bengal is a popular destination for seeking brides.

And as for the practice of dowry, wherein grooms—in what are typically arranged marriages—gallantly insist on large cash and non-cash payments from the brides’ families:

The father of one Bengali bride from Hooghly district, married to a low caste man from a village in Utah district of UP [Uttar Pradesh], explained that it was poverty that made them send their daughters away. Further, the demand for dowry by Bengali grooms made it impossible for them to marry their daughters locally. Another reason seemed to be the unattractiveness of local grooms. One mother who had sent two daughters to UP said that, she has to support financially the one daughter who was married locally to a Bengali groom. Very significantly, the long distance marriages that Bengali women enter into are “dowryless” and even the marriage expenditure is taken care of by the needy groom. Thus, economically, such marriages are nearly costless for the girl’s parents while a local marriage would be a significant drain on household resources.

I found Prof. Kaur’s article to be an eye opener. It makes a convincing argument and does a great service in illuminating the social consequences of the economic hell that West Bengal is going through.

However, I wish there were more facts in the article. I wanted more cold hard data on inter-state marriages and on comparative dowry trends in India. Also, I would have liked some testimony from the brave Bengali brides. How have they been faring in their faraway homes? Do they feel abandoned by their parents who chose to send them away to distant lands? Do they blame anybody? And what do their husbands feel about their geographically marooned wives?

Finally, in the absence of more income and wealth data on the northern Indian husbands of Prof. Kaur’s Bengali brides, I am not entirely convinced that the low sex ratio in the northern states has little to do with the Bengali Bridal Diaspora phenomenon. Sure, the northern husband may not ask for a dowry from his Bengali in-laws. But is that because he is richer or is that because he is desperate for a bride on account of being the resident of a low sex ratio state? Conversely, why would a Bengali man ask for a stiff dowry? He may be poor—and greedy!—but he probably knows that other Bengalis are poor too and that, therefore, he could end up without a mate if he insisted on a high dowry. Bengal’s higher female-to-male ratio may be at least part of the answer to this conundrum.