Petroleum Engineer Wages Rising with Oil Prices

Man, why didn't I freaking read the Wall Street Journal before teaching this morning? Today I taught on how economic growth and labor markets are connected via the market for labor and the demand for labor being a function of both output prices (firm output prices) and average labor productivity (the chief driver of economic growth). I showed students that firms hire workers up to the point where the marginal benefit of the last worker hired is equal to or greater than the marginal cost. That gobbleygoop translates into this, though: firms hire if and only if the worker's unique production (ie, marginal product) can be sold on the market at a price that makes his marginal revenues exceed or equal his own wage. When output prices increase, then holding wage constant, firms want to hire more workers than before, and this ultimately shifts the demand for labor to the right, causing wages and employment to rise. Well, I was trying to come up with a relevant, current example of output prices causing this kind of shift, and I thought, "Oil! Oil prices are rising so anyone who makes oil would be hiring more workers because the value of their marginal product is going up." But, then I couldn't for the life of me figure out who actually "made" oil. Saudi Arabia? I know it's a company, but I drew a complete blank, and it was the middle of class, so I changed gears and said, "hmm. Let's try gold instead. Companies that mine for gold hire more gold workers because gold prices have been rising which increases the value of worker's marginal product, causing a rightward shift in demand."

Well, what do you know. I open the freaking WSJ that I actually picked up this morning before class, but was too busy to read, and saw this article, "A Gusher for Oil Grads: As Energy Prices Soar, Petroleum Engineers Get Top Dollar." And, of course, it perfectly illustrates the point. From the article:

With energy prices soaring and oil-company ranks graying, petroleum-engineering graduates have become a hot commodity.

As a result, students are swelling the ranks of college engineering programs, positioning themselves for energy-industry jobs with salaries that make tenure-track professors envious. Top-ranking petroleum-engineering graduates this year can expect starting pay of $80,000 to $110,000, plus signing bonuses and other perks.

I sent the article to students just now, but in my experience, students delete this stuff and only if I can connect it in class to the material do they really "get it." Oh well.