Posts Tagged ‘engineer’

Smell the supply and demand?

May 17, 2008

The New York Times says Japan is running out of engineers. My response:

The red line is the number of people who study engineering. The blue line is the number of engineers that Japanese industry demands at the given salary. If we are at the light blue line, firms want more engineers than Japanese universities produce. In this situation, firms will raise the salary they pay to engineers, more students will enter the now more lucrative field, and we will end at the market clearing yellow line.

My guess is that the equilibrium used to be a a higher number of engineers, and the government is worried. In an efficient market, labor will go where it is most socially useful. The New York Times seems to think that the migration of workers to the arts and service industries is a bad thing, but here in Taiwan Japanese art is everywhere, from the fashion on the streets to the J-Pop on the radio. If Japan is a cultural force here in Asia, why not let that part of the economy grow stronger?

One of the key early insights in Economics was that in any voluntary transaction, both parties are made better off. Markets aren’t zero-sum games. If Japanese are choosing to pursue non-engineering careers, it might change the composition of Japan’s economy, but that isn’t a bad thing. In fact, students’ choice of other careers is making the Japanese (as a whole) better off.