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On the economics of economists

We economists spend a lot of time writing about the job market. Can the unemployment rate drop any further? Will the number of unemployed people increase when the Fed starts to raise interest rates? And will wages begin to pick up if the unemployment rate does drop?

To pursue these questions, economists construct theoretical models of the labor market, gather hiring and wage data from a variety of industries and regions, and–in the United States–pore over the monthly employment situation report which is published by the Bureau of Labor Statistics at 8:30 am on the first Friday of the month.

But what about the market for economists? Having recently returned from the largest regular gathering of economists in the world, the annual meetings of the American Economics Association, I can report from the front lines of the market for new economists.

In 2014, US universities produced nearly 1200 PhD’s in economics; the number that will be produced in 2017 is probably similar. Those expecting to complete their PhD’s in 2017 have been busy for the last few months preparing their job market papers. These papers are typically a chapter from their PhD thesis, usually the one that job candidates (and their academic advisors) believe to be their most promising work. Most new PhD’s have already spent four or more years in graduate school learning economic theory, statistics, and the nuts and bolts of their own specialty (e.g., international economics, macroeconomics), but for most candidates the job market paper will be one of their first major pieces of serious research.

During the fall semester, candidates polish their job market papers to a high-gloss, give practice presentations to faculty and other graduate students (or anyone who will listen), and line up faculty members to write letters of recommendation. They also practice their pitch—the 30-second elevator pitch, the 3-minute cocktail party pitch, and the 10- to 15-minute job interview pitch—so when someone at the meetings casually asks about their research, they will have an answer of the appropriate length. There is an interesting piece on navigating the economics job market by John Cawley.

Sometime during the period between August and November, ads appear in the American Economics Association’s Job Openings for Economists—or JOE, for short. The ads cover a wide range of jobs: permanent and temporary academic jobs from large research universities and small teaching colleges, non-academic jobs including the Federal Reserve, agencies of the United States government (including the CIA), and a variety of jobs in state governments, international institutions (e.g., the World Bank and International Monetary Fund), and consulting firms.

And then the rush begins. Up until about 10 years ago, applications came in via US mail and with the assistance of a lot of photocopying; our office was routinely buried in paper for three months. Now, much to the relief of our administrative assistant, jobs are applied for via e-mail and online submission.

Employers have a variety of attitudes toward field specialization. The top 10-20 university economics departments typically do not care too much about the applicant’s specialization—they are just looking for the best economist they can hire. Many, however, will have a preference: if there is a newly endowed chair in finance, well, a microeconomic theorist—even a very good one—won’t stand a chance. Because submitting an application is now cheaper—no postage or photocopying to pay for— it is also easier to send more of them, and to send them indiscriminately. This year, my university advertised for a particular sub-specialty (open economy macroeconomics)—of the 300 or so applications received, about a third of them came from applicants who had little to no background in that field (needless to say, this reduced the amount of time we spent on those applications).

The top 10-20 university economics departments typically do not care too much about the applicant’s specialization—they are just looking for the best economist they can hire.

After sifting through a dauntingly large number of applications, we pared down 300 applications to 16 plausible candidates. We met these candidates for 30 minutes each in a hotel suite at the Economics Association’s annual meetings, which took place this year in Chicago, on 6-8 January. (Quick advice to convention organizers: Chicago is a wonderful city; it is a lot less wonderful in January when the city becomes one big walk-in freezer.)

The economics meetings are huge. In addition to hundreds of sessions devoted to academic presentations (which I would have been happy to attend if I hadn’t been interviewing job candidates), it is a great time to meet up with old friends in the profession, and to stroll through the exhibitors’ hall to see the latest in computer software, textbooks, databases—as well as pick up as many free pens and souvenir mugs as you can carry.

The evidence suggests that the economics job market works reasonably well. Research on the economics job market during 2007-2010 suggested that 94% of newly minted economists found employment during the job market season and two-thirds got jobs that matched their preference (university, government, etc.) and another got their second choice type of job. A 2013 survey by the National Science Foundation found an unemployment rate among those with PhD’s in economics of less than 1%, suggesting that longer term employment prospects for economics PhD’s are pretty good.

And the pay is pretty good too. The most recent survey of salaries in the market for new PhD’s, conducted by the Walton Business School at the University of Arkansas suggests that the average pay for a new faculty member in economics averages in the low to mid-six figures for folks who snag jobs at PhD granting institutions, somewhat less for those teaching at non-PhD granting institutions.

My own university’s search for a new economist is not yet complete. At the time of this writing, we have invited a subset of the candidates we interviewed in Chicago to come to campus and spend a day interviewing, presenting their job market paper, and spending some time socializing with potential future colleagues. We are anxiously awaiting them and hope that we like them, they like us, and a match will be made so that we can live happily ever after.

Featured image credit: Chicago buildings united states by marielegoff. Public domain via Pixabay.

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