William Watson: The one (and only) way government can help labour markets

Participants in labour markets can handle matters all on their own own

If the Liberal platform is a guide – and we’re a democracy therefore it should be – next week’s budget contains $775 million of new money for a number of “labour market development” initiatives. Though any support for markets among left-of-centre parties is to be encouraged, the thing about markets is they don’t absolutely need lots of support. They are places, by definition, where individuals come together to trade. In labour markets, particularly, suppliers need work while demanders need workers. Governments may have to enforce legal contracts between workers and employers, but beyond that, governments may not be required. Participants in labour markets have compelling economic reasons to handle matters all by themselves.

Yes, yes, we all know: Markets can fail in myriad ways that economists have spent the last half-century elaborating. But the proven fact that labour markets can evolve in mysterious ways, with supply and demand taking completely unexpected turns, doesn’t give government any special understanding of their future evolution.

One thing governments can perform, however, is provide details about labour markets. A good example is a new Statistics Canada study what university graduates from different fields of study earn. The information come from this year’s National Household Survey, which replaced the compulsory Long Form Census. They reveal what male, female, college, bachelor’s and master’s graduates with degrees in detailed fields of study earned typically this year. The table attached to this article provides only a taster from what’s much too rich a buffet of data to reproduce in its entirety. If you or a friend are attempting to decide what to specialize in, the study will at least let you know what graduates from different disciplines were earning in 2010 who have been working full-year and full-time and were between 25 and 54 years of age. (The study calculates these averages only if 200 people or more people were working in any gender/discipline/degree category, so a few of the entries for females are blank).

Money isn’t everything, but when you need to do want to maximize your earnings, studying money appears to be the best job for which makes it. Bachelor’s graduates in management science and quantitative methods made $130,000 typically if they were male, $95,000 if female. However, in 2010 Michael Lewis’s The large Short also demonstrated the unhelpful role “quants” took part in allowing the financial market disturbances of 2008 and beyond, so maybe the market has been shorting these incomes as these data were collected.

Finance, accounting and general business/commerce graduates also did well, with males averaging over $100,000 and some women one-fifth to one-quarter under that.

At the underside end from the distribution are theologians, social workers and philosophers. Maybe society should value their work more, but it apparently doesn’t. Still, their labour presumably brings its very own (untaxable!) satisfactions.

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As an economist, I’m happy to observe that econ grads do several thousand dollars annually better than the typical university graduate. As someone who writes for newspapers I’m sorry to see that my male journalist colleagues do $14,000 worse than the average for those fields. On the other hand, female journalists do $3,000 much better than female grads generally.

Data about what was happening in 2010 obviously won’t tell you what demand and supply is going to be doing in 2020, 2030 or 2040. And cash isn’t and should not be all things in choosing one’s university studies. But information such as this study provides can’t hurt and probably can help as people come to make their post-high-school decisions about what to study. In fact, for informed decision-making it would be useful to have much more detail: how much variation around the average can there be in each discipline? What’s the typical age-earnings profile? How many employed graduates of each discipline exist and how quickly has employment been growing (or declining)?

Private businesses could produce comprehensive data of this sort. But once they had attended the considerable expense of doing this, how could they make sure just those customers prepared to pay it off could be aware of it? Providing more information about what’s happening in the labour market may therefore be something government needs to do in order to assist the labour market. Despite what you may read in next week’s budget, that may be all it needs to do.