Economic statistics are used every day to justify national policy decisions, and to be an informed citizen, you need to know what the numbers mean. The unemployment rate, for example, is different than the underemployment rate (which counts people who are working part-time but wish to be employed full-time, and those who have given up looking for a job), and both numbers are higher for millennials than for the population at large (16% unemployment for millennials + 1.7 million who have given up vs. 7.6% overall unemployment + 4.3 million who have given up). The Gallup organization continues to report that the economy is the public’s “most important problem," and only 29% of Americans now say the country is on the right track. Without knowing how the economy is or isn’t working, however, it’s hard to see how Americans can demand that policy makers take the necessary actions to restore the U.S. economy to full employment.
Certain concepts, including the margin (e.g., marginal profit, marginal productivity), trade-offs, and opportunity costs, are critical to understanding how to manage a business, how to manage one’s time, and how to decide which opportunities to pursue, whether they are related to your career or even leisure. Knowing these and other useful concepts, and how to apply them, will even make you smarter when you are looking for a job, as most job interviews ask you to analyze situations, or make decisions, and justify them based on some logical set of criteria.
Another instance economic knowledge comes in handy is when you hear about “the 1%” in the news. Knowing exactly who is in the 1% helps you to be better informed and to overcome your automatic assumptions. In addition, you might be surprised to know that Americans who earn more than $34,000 per year are in the 1% globally. But then again, 53% of American workers make less than $30,000 per year. If you want to see the 1% visually, check out this cool blog for this and other economic stats.
An econ class also provides a useful foundation for other college coursework, even if you’re not interested in majoring in economics or business. Even in my wife, Karen’s, marketing class, she talks about demand curves in order to teach her students what drives consumer demand for products and services. In my management classes, we discuss labor productivity, market competition, competitive advantage, and a host of concepts and issues that require some basic knowledge of economics. If you decide to be an entrepreneur, you will need to understand what drives your customers through your front door, or keeps them away. For instance, consumer confidence has stalled (according to Gallup). What does that mean for a small business owner or even a college graduate looking for work? It might mean that businesses will be more cautious hiring or that consumers will pull back on spending.
No matter whether you want to work for someone else, or want to work for yourself, taking Econ 101 is going to make you a more effective valuable member of the workforce.
Aneil and Karen Mishra are business school professors and authors of Becoming a Trustworthy Leader (2013).