We all use economics. As we go through our daily lives we are subject to policy, service or pricing that’s shaped by economic forces.
As an example, assume you get invited to a party. You can’t arrive empty-handed so you decide to drive to the store to get a bottle of vodka for the host. You decide to fill up your car at the gas station along the way. Pumping gas and buying a bottle of vodka at the liquor store are both influenced by economics.
The price gas stations charge for gas is based on the future price of oil and government tax policy. The price of the imported vodka is determined by several factors ranging from the price of potatoes and currency exchange rates to the effect of economic sanctions imposed on the exporting nation.
Also, if using a credit card at the store for the purchase, the interest rate charged is also affected by economics.
What is an Economist?
An economist is someone who collects, researches and analyzes variables to forecast trends in our ever-changing world. The end result is to assess the consequences on society.
These economic variables may be on a more macro level such as interest rates, employment or trade deficits. Other times the data being analyzed is more micro, pertaining to specific business operations like budgeting, quality control and pricing.
Economists often work independently on projects within a firm, but will collaborate and interact with colleagues when conducting surveys or presenting findings. Media outlets such as websites, newspapers and television then disseminate the results of studies or forecasts of economists as part of their content platform.
Who Uses Economists?
In the public sector, it is usually to shape policy in an attempt to improve society. According to the BLS, nearly half of all economists work in government at the federal, state and local levels. Policymakers employ the skills of economists to analyze how their laws or rulings might affect economic conditions including employment levels and financial markets.
According to the BLS, nearly half of all economists work in government at the federal, state and local levels.
Large quasi-governmental organizations such as the Federal Reserve Bank (Fed) and European Central Bank (ECB) are staffed with economists who’ve been in charge of assessing and implementing policy for the global financial system.
Many colleges and universities use the services of economists who have joined the ranks of academia as professors. These economics professors teach economics to thousands of students to understand the concepts and theories.
In the private sector, a corporation takes this forecast and applies it to their strategy in an attempt to maximize profit. Banks depend on economic forecasts regarding the amount and structure of loans they want to carry on their books. A bank might increase its mix of floating rate loans it issues if its economist forecasts stronger economic growth.
Brokerages employ the use of economists to analyze risk of current investments held by the firm and their clients. The forecasts created by economists are used throughout the firm, including research analyst recommendations, portfolio management decisions by financial advisors to tailored advice from investment bankers. Economics affects everything from the borrowing costs of foreign governments to the hiring practices of Silicon Valley start-ups. Sometimes their data is used strictly on a proprietary basis and is not released to the public.
Consumer product companies often hire microeconomists to assess the quantity of products consumers are likely to demand at different price points. This helps large consumer product companies conduct market research on whether to introduce a new product into the market.
Sometimes, the two sectors overlap. For example, a government think tank might assess how a giant merger in the consumer goods space could result in a potential anti-trust ruling, affecting many stakeholders. These include the employees in that industry, the financial impact on the company’s stock price, the retirement pension funds holding the stock and ultimately the price of the item to consumers.
In turn, the private company might be doing similar analysis itself in assessing the deal and may decide the risks outweigh the benefits and decide against the merger.
What are the Required Skills and Credentials of an Economist?
Analytical skills are essential for an economist when studying data. Strong computer skills are also necessary to further analyze the data using computer models, spreadsheets and databases. Quantitative methods are increasingly used, requiring a high understanding of statistics and math. But no amount of technology can replace the need for critical thinking skills in interpreting the results.
Once the analysis is complete, strong communication skills are needed to relay the findings to the right people in a language they understand. Complex economic jargon should be summed up into clear and concise forecasts and recommendation. Writing skills are very important as findings are often written for dissemination by media sources or publications in academic journals.
Writing skills are very important as findings are often written for dissemination by media sources or publications in academic journals.
Usually, using the term ‘economist’ denotes having a bachelor’s degree in economics. Many economists attain additional academic credentials, often at the Master’s or Ph.D. level. Also, work experience is very important for advancement.
What is the Compensation for Economists?
The required academic background is high but the compensation can make it worthwhile. The median annual pay of an economist was $91,860 overall in 2012, according to the BLS. And if employed by a finance or insurance company, the BLS’s Occupation Outlook Handbook puts the median annual compensation at $110,580 as of May 2012. Finally, Payscale.com indicates the starting salary for an economics major is $48,500 and goes up to $94,900 by mid-career.1 If these numbers are high, it’s because they are. A 2014 article appeared on Slate entitled “Want to Be Stinking Rich? Major in Economics”.2
Payscale.com indicates the starting salary for an economics major is $48,500 and goes up to $94,900 by mid-career.1
Since the largest employer is the federal government, pensions or other ancillary income and benefits should also be considered.
How do I Become an Economist?
To be hired as an economist by a private sector firm, you’ll need a bachelor’s degree in economics and a Master’s degree or Ph.D. is highly preferred. Business draws the most economists as finance and consulting companies often clamor for these candidates who they know, just based on their degrees, are highly intelligent employees which add credibility to their firms.
The top five sectors employing economists, according to the BLS:
1- Federal Government
2- State and local government.
3- Scientific R&D services
4-Management, scientific and technical consulting services
5- Finance and insurance
Many aspiring economists seek out employment in the public sector, namely government. More entry-level positions, primarily at the Federal government level, may hire economists with a bachelor’s degree only, while private sector employers typically prefer at least a Master’s degree. The employment of economists is expected to grow at 14%, from 2012 through 2022, according to the BLS.3
A career as an economist might seem a bit mundane. Crunching numbers, making forecasts and talking in a language many people can’t understand. But in recent years, many economists have made decisions (and headlines) that are anything but.
In the wake of the financial crisis, it seems like everyone has an opinion on the economy or the Fed. Talking heads all over television are more than happy to offer their views. Politicians have entered the fray and run campaigns based on their economic beliefs. Economics seems to be as popular a topic to debate as ever. Who could have ever imagined a rap parody between Hayek vs Keynes (two classic economists) getting over 5 million views on YouTube? 4