See Choices and consequences in the real “game of life”: From falling in with “bad apples” to choosing a major, economists decipher how early decisions shape long-term outcomes by Jeff Horwich, Senior Economics Writer for the Federal Reserve Bank of Minneapolis. Excerpt:
"The research on Minnesota students from Nath, Borovičková, and Leibert (discussed above) finds that while high school sorting matters, the most important “decision node” appears to be the choice of college major. The economists look at earnings three years after graduation.
The University of Michigan’s Kevin Stange looks further out, tracing students in the 10 most popular major categories roughly 16 years into the workforce. (“The Returns to College Major Choice: Average and Distributional Effects, Career Trajectories, and Earnings Variability,” with Rodney Andrews, Scott Imberman, and Michael Lovenheim). Using linked education and earnings data from Texas, the economists get a multidimensional view, uncovering how income grows as workers gain experience and how earnings are distributed for workers who had the same major.
The nature of the patterns might not surprise, but the changes over time are striking to see. Liberal arts majors have the lowest earnings at all points and serve as the baseline against which other majors are compared. Recently out of school, engineering majors make more than $22,000 more annually than liberal arts majors (in 2016 dollars; importantly, these findings control for standardized test scores, demographics, and other factors). Ten years later, the gap has grown to more than $32,000. Business and economics majors make a little less than engineers but see similar wage growth. The biggest leaps come for biology and health majors—the effect of doctors who enter the workforce late and earn less as medical residents, but make rapid gains when they enter full practice.
Communications and social science majors, by contrast, do not make much more than liberal arts majors to begin with, and this small premium actually shrinks over time. A decade into the job market, the average communications major makes about $4,000 more annually than liberal arts; the average social science major just $2,600 more.
The within-major distributions are similarly eye-opening; majors vary significantly in how concentrated the earnings are. Earnings for business and economics majors are particularly concentrated among the highest earners. Earnings for engineers, by contrast, rise more evenly along the earnings range. The slightly higher average earnings for social science majors can be attributed largely to the very highest earners in this group; most social science majors actually earn less than liberal arts majors.
The economists also find majors with high returns have more stable earnings over time. In general, said Stange, the results show that choosing the right college major matters more to your earnings than the decision to go to college at all. The research is illuminating at a time “when there is a lot of concern about the value of college, writ large,” Stange said, and “many states are scaling back their investments in certain programs based on what investments are going to pay off in the labor market.”"
See also 33 of the Highest-Paying Majors You Can Choose in College (2022).
The last two items in the list below suggest that simply finishing college has value in terms of signalling to employers what your traits are and in developing cognitive endurance.
Related posts:
Studying Economics Increases Wages a Lot (2020)
What College Majors Pay The Highest? (2013)
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