Why getting a Mickey Mouse degree or working for a benevolent monopsony are the only ways to guarantee a job

Via Alex I learn from the ONS that Media graduates have the second highest rate of employment of any graduate:

Employment rate by degree

…but they also have the lowest aggregate wages. Ouch.

Wages by Degree

This is a nice contrast to the graduates with the highest wages and the highest rate of employment of any graduates: Doctors.

Peter_Capaldi_Doctor_Who-440539

Just my little joke…anyway, moving swiftly on. This seems pretty odd, no?

Medicine needs good A levels, constant hard work and the final years of the degree are spent on placements which normally lead to jobs in medicine. Media Studies requires significantly less good A levels, a lot less work and you don’t get nearly as much support finding a job. So what gives?

The 2010 economic Nobel prize went to Diamond, Mortensen and Pissarides for looking into exactly this sort of problem. Matching jobs to workers is not a costless or effortless process. Although economists have spoken about this since the 1930s this only really got formalised in the 1970s.

Several factors can make finding employment (or employees) difficult. Imperfect information about trading partners can lead you unaware of opportunities; heterogeneous supply and demand can mean that there are job openings for which nobody is suitable; slow mobility could prevent people from moving to where the work is or people may be poor judges of their own skills and demand too high a wage.

Medicine degrees are incredibly hard work and require incredibly bright students. The search process for students is totally different to “normal” job hunting because there is one employer, the NHS. After an online application, students rank their preferred cities, ranked and then selected into jobs by the hospitals they are matched with. The high skill and short supply of Medics explains their high wages and this search system explains their high employment. A similar system of search exists for nurses, which have similarly high employment rates.

Media degrees are easier to start and there are no specific search programmes set up to find graduates employment and yet they are still employed at far higher rates than Humanities graduates, even though their wages are similar and Humanities graduates are just as thick. [1] What’s the difference? Its the reservation wages stupid. And added flexibility. Being told you’re doing a Mickey Mouse degree reduces your reservation wage and makes the psychic cost of taking non-graduate jobs easier to bear. An Historian would never make lattes, a meeja grad might. Graduates become easier to match to jobs because they’re willing to cast the net wider and accept a worse wage.

For medics, in terms of search costs we can see they have higher reservations wages than Media studies students, but their sole employer is used to this. An efficient matching mechanism helps to match supply to demand. Supply and demand are kept close to one another because the number of new jobs and new graduates is predictable. Finally, new doctors list the cities they’re willing to move to reducing frictions associated with mobility.

Engineering is more curious, but thinking about search costs can help us explain their lower employment and high wages. They’re clever, hard working people and many engineering degrees require vocational work. But the multiplicity of firms involved means that search costs are higher. Plus, whereas hospitals tend not to move around much engineering work does. For example, over the next decade (or more) there will be work in Somerset, then it might be in Cumbria, or London. While it can be hard to find a job, there is a big shortage of engineers. 6000 people will be required at any one time at Hinkley Point C. Crossrail’s progress means that there are no qualified drillers left in the UK. Want to bore a tunnel? Bore off. All the tunneling experts are busy. 

It’s easy to tell a story looking at the above tables and say that of course lots of media students are in employment they’re cheap. That logic kinda breaks down when you apply it to expensive doctors. And a story about high skill people being super employable breaks down when you look at engineering. But thinking about search costs can help explain a lot and make slightly odd patterns easier to explain.

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[1] I’m a History graduate. Calm down.

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4 thoughts on “Why getting a Mickey Mouse degree or working for a benevolent monopsony are the only ways to guarantee a job

  1. I am not sure where most media grads work, but at least in some media jobs your wage profile can be quite steep. By which I mean at first you are completing with lots of young people, possibly with wealthy supportive parents, willing to work for peanuts to get “in” to media. Then once you are in, your wage can rise very sharply.

    does your graph show starting salaries? Christ I feel underpaid.

  2. Good post. I like your points about monopolies and matching.

    In general, though, these raw earnings per degree comparisons drive me nuts because they don’t take into account gender differences in earnings and employment. Do engineers earn more because engineering is a good degree, or because the majority of people who get engineering degrees are men, and men typically work longer hours than women do, have fewer caregiving responsibilities than women, etc.

  3. Frances, will those things have kicked in if the data are starting salaries. At what age do most graduates start to have children?

  4. I think Luis makes a good point, the gender pay gap for recent graduates will be very small.

    Otherwise, I have to say that the ONS’s data is a little patchy. They give data on biology students’ non-graduate working rates, but the others I’ve guessed. I’m going to get in touch and ask them for the raw data as the Labour Market Stats I’ve seen and the report don’t show them.

    So yeah, Luis, I think you might see some of the steep wage rates in action, but I think that might be a bit of a London-centric attitude. I don’t think that story necessarily applies to most places or most people. So the aggregate effect is probably tiny. Plus a lot of the people being bankrolled by mummy and daddy will have done humanities degrees dahrling.

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