As an associate economics professor at Smith College here are my comments:
The highest paid jobs for econ majors are in investment banking, and I would guess that the salaries earned by i-bankers play a huge role in why econ majors earn relatively so much. If you don’t go to an elite school you probably don’t have a chance at getting an i-banking job. Majoring in economics at a good school signals that you have the math skills to succeed as an i-banker.
Smith College majors do learn basic statistics and discounted present value. Our majors, however, do learn little else of direct practical value that helps them in an investment banking career. Asian econ majors are vastly over-represented among Smith econ students who go into i-banking. Nowadays, the main path to getting an i-banking job is via an internship during the summer after your 3rd year of college. The only course that i-banks really want you to take is accounting.
JonahSinick, to help students who want to earn high salaries you should consider doing a post on how to get an i-banking job.
The highest paid jobs for econ majors are in investment banking, and I would guess that the salaries earned by i-bankers play a huge role in why econ majors earn relatively so much.
The skewing occurs in the median case as well as in the mean case and at the right tail, so even if investment banking jobs are higher paying than the highest paying jobs open to people in other majors, that doesn’t immediately suffice to explain the phenomenon – can you flesh out your reasoning?
If you don’t go to an elite school you probably don’t have a chance at getting an i-banking job.
Here too, there’s a large wage gap even for students who don’t go to elite schools.
Majoring in economics at a good school signals that you have the math skills to succeed as an i-banker.
Would majoring a quantitative STEM field be just as good or better?
Nowadays, the main path to getting an i-banking job is via an internship during the summer after your 3rd year of college.
Do you know how one goes about these internships?
JonahSinick, to help students who want to earn high salaries you should consider doing a post on how to get an i-banking job.
This is something that we’d like to investigate, though it’s not the high priority for us right now (we’re more focused on preparing for a career earlier in college than on getting a job out of college, though we’re looking at the latter subject some because it bears on the former subject).
You are right about i-banking not skewing the median case. I don’t know what i-banks think of STEM students. You apply for the internships as with normal jobs. I suspect that elite college career development offices have lots of information on internships. My students who want to be investment bankers all seem to know about the importance of internships.
It could skew the median case if there are people who do econ majors specifically because they want to become i-bankers and also have expected earnings above the counterfactual median.
Hey Jonah, you might be interested in http://www.mergersandinquisitions.com It’s been years since I looked at it and it’s been extensively redesigned but as a site with information about I-banking it was excellent way back. There’s an associated site of similar quality on Management Consulting as well. Its name escapes me but it shouldn’t be too hard to find from M&I
signals that you have the math skills to succeed as an i-banker.
Investment bankers don’t need good math skills.
Let me unroll this a bit.
Strictly speaking, an investment bank is a pre-Glass-Steagal repeal bank which declared itself to be an investment and not a commercial bank. There really ain’t no such thing any more. So we’ll talk about banks which do things in financial markets (as opposed to just take in deposits and make loans) -- that’s pretty much all big banks nowadays.
Inside any big bank there are multiple career tracks which have drastically different requirements. One of them is the traditional “investment banker” track. This generally involves providing services to companies in things like IPOs, bond issues, structured transactions, etc. An investment banker doesn’t need to know much math. He does need to be very familiar with complicated Excel sheets, though.
Another career track used to be trading and a lot of quant-oriented people went there. However because of Volcker Rule banks can’t do much prop trading any more and so are less interested in traders. Quants can still apply if they want to work in risk management, though.
Yet another career track is that of a salesperson. No math necessary, but you’d better know how to schmooze :-)
As an associate economics professor at Smith College here are my comments:
The highest paid jobs for econ majors are in investment banking, and I would guess that the salaries earned by i-bankers play a huge role in why econ majors earn relatively so much. If you don’t go to an elite school you probably don’t have a chance at getting an i-banking job. Majoring in economics at a good school signals that you have the math skills to succeed as an i-banker.
Smith College majors do learn basic statistics and discounted present value. Our majors, however, do learn little else of direct practical value that helps them in an investment banking career. Asian econ majors are vastly over-represented among Smith econ students who go into i-banking. Nowadays, the main path to getting an i-banking job is via an internship during the summer after your 3rd year of college. The only course that i-banks really want you to take is accounting.
JonahSinick, to help students who want to earn high salaries you should consider doing a post on how to get an i-banking job.
Thanks James!
The skewing occurs in the median case as well as in the mean case and at the right tail, so even if investment banking jobs are higher paying than the highest paying jobs open to people in other majors, that doesn’t immediately suffice to explain the phenomenon – can you flesh out your reasoning?
Here too, there’s a large wage gap even for students who don’t go to elite schools.
Would majoring a quantitative STEM field be just as good or better?
Do you know how one goes about these internships?
This is something that we’d like to investigate, though it’s not the high priority for us right now (we’re more focused on preparing for a career earlier in college than on getting a job out of college, though we’re looking at the latter subject some because it bears on the former subject).
You are right about i-banking not skewing the median case. I don’t know what i-banks think of STEM students. You apply for the internships as with normal jobs. I suspect that elite college career development offices have lots of information on internships. My students who want to be investment bankers all seem to know about the importance of internships.
It could skew the median case if there are people who do econ majors specifically because they want to become i-bankers and also have expected earnings above the counterfactual median.
Hey Jonah, you might be interested in http://www.mergersandinquisitions.com It’s been years since I looked at it and it’s been extensively redesigned but as a site with information about I-banking it was excellent way back. There’s an associated site of similar quality on Management Consulting as well. Its name escapes me but it shouldn’t be too hard to find from M&I
How elite is elite?
Top ten, more or less.
Is Smith College considered top ten?
No.
Investment bankers don’t need good math skills.
Let me unroll this a bit.
Strictly speaking, an investment bank is a pre-Glass-Steagal repeal bank which declared itself to be an investment and not a commercial bank. There really ain’t no such thing any more. So we’ll talk about banks which do things in financial markets (as opposed to just take in deposits and make loans) -- that’s pretty much all big banks nowadays.
Inside any big bank there are multiple career tracks which have drastically different requirements. One of them is the traditional “investment banker” track. This generally involves providing services to companies in things like IPOs, bond issues, structured transactions, etc. An investment banker doesn’t need to know much math. He does need to be very familiar with complicated Excel sheets, though.
Another career track used to be trading and a lot of quant-oriented people went there. However because of Volcker Rule banks can’t do much prop trading any more and so are less interested in traders. Quants can still apply if they want to work in risk management, though.
Yet another career track is that of a salesperson. No math necessary, but you’d better know how to schmooze :-)