The academic job market is structured in many respects like a drug gang, with an expanding mass of outsiders and a shrinking core of insiders. Even if the probability that you might get shot in academia is relatively small (unless you mark student papers very harshly), one can observe similar dynamics. Academia is only a somewhat extreme example of this trend, but it affects labour markets virtually everywhere. One of the hot topics in labour market research at the moment is what we call “dualisation”. Dualisation is the strengthening of this divide between insiders in secure, stable employment and outsiders in fixed-term, precarious employment. Academic systems more or less everywhere rely at least to some extent on the existence of a supply of “outsiders” ready to forgo wages and employment security in exchange for the prospect of uncertain security, prestige, freedom and reasonably high salaries that tenured positions entail...In ECON110 we talk about tournament effects, and this is exactly an example of tournament effects at work. A small group of highly successful workers (insiders) get paid high salaries, while many others (outsiders) accept low salaries in exchange for the chance to become one of the highly successful few in the future. For a highly educated person to take a low-paid entry-level job isn't as irrational as it may seem at first. It's a simple benefit-cost decision for the outsiders - the cost is foregone income now (the premium they could have earned outside academia); the benefit is an expected future gain in the form of a cosy academic position with higher salary (maybe?). So, if the returns to becoming one of the successful insiders are high enough, then even a low probability of becoming an insider will induce many recent or nearly-completed PhDs to join the outsider part of the market.
The New Zealand academic labour market is somewhat dissimilar to the U.S. or European markets, in that relatively secure employment is possible even though there is no tenure track. This is similar to the situation in Britain described in the blog post. However, that doesn't mean that there aren't a number of New Zealand beginning academics in precarious work (I had thought our academic union, the TEU, was looking into this, but I can't find anything on their website). My first few years were in rolling fixed-term teaching fellowships.
Now I'm feeling like I'm missing a trick here. I should definitely be exploiting PhD students for more low-paid work.
[HT: Eric Crampton at Offsetting Behaviour]