When we choose a major in college we are to some extent choosing a series of future wage rates. The amount of human capital in which we invest is to some extent linked to our college major — different college majors generate different wages.
Many of my students, and often unfortunately too their parents, believe that unless they major in business or engineering they are doomed to lives of poverty.
I just published some research I’ve done on University of Texas graduates. While differences in earnings by college major are huge, once you account for longer hours worked by business and engineering majors, by the fact that they often have higher SAT scores, and other factors, the differences are much smaller; indeed, over half of the variation in earnings by major disappears.
In other words, the amounts of human capital generated in college by different choices of major are not so different from one another as most people believe. Liberal arts majors don’t do that much worse than business majors; and economics majors do as well as business majors do.
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There was a recent article addressing this subject, that the benefits of an Ivy League education may not be as great as we think. The students going there may have been selected under more scrutiny, but the training provided does not have as much of an effect on future wages when controlled for SAT scores and the like.
So basically, you control for everything that makes people choose their major in the first place, and business majors still largely come out on top (though by a lesser margin)? This doesn’t exactly disprove the stereotype.
Is it me, or does this make no sense? Higher salary is not because of major, but because the people in those majors work harder and are smarter? Well, that’s why those majors results in higher salaries.
So I guess if you are a smart person that is willing to work hard, and want to make a higher salary, choose one of the business/engr majors. If you’re not smart and you don’t want to work hard, pick a liberal arts major and you’ll make less money.
I majored in Geography, which was a small department at my state university. It was so small that the ratio of earnings was very heavily skewed by the addition of one famous sports figure who had graduated from my department about 12 years earlier than me and was making millions of dollars. So my question is this – how do you account for people who majored in one thing and then go on to work in something entirely different? In my own case, I do no geographic work at all, but am instead a computer systems administrator. A large number of my friends and colleagues have similar stories. In all of these cases (except the sports star), we have the jobs we have because we could graduate from college, not because of what we graduated in. How do you account for that type of discrepancy?
I agree with DW – there’s large self selection here. Would randomly assigning someone with lower abilities and low desire to work who otherwise would have chosen a soft major to a difficult major increase their future income? Maybe a little, through peer effects. But statistically controlling for how hard they work misses the point.
This doesn’t make any sense. A smart art history major who studies his/her eyeballs out is still going to have a harder time finding a good job than an average CS major.
So what you are saying is that people who didn’t get high SAT scores and do not work long hours can be satisfied with the idea that they are, AFTER ACCOUNT FOR VARIOUS FACTORS, making the same kind of money as their smarter, more hard-working counterparts.
Spectacular analysis.
Mr. Hamermesh, would you kindly elucidate how you accounted for (read: obviated) high test scores, long working hours and ‘other factors’ in arriving at your results? As an engineering grad, I resent the implication that the wages I earn can be DISCOUNTED by the fact that I work harder and did well on a standardized test.
I do not disagree with your last statement though: Liberal arts and econ majors do not do much worse than business majors. I wonder why….how about…HARD WORK and GENERAL APTITUDE?
Liberal arts students are much sought after in business settings, by the way, because of the unique manner in which they go through four years of college – with inquisitiveness and a questioning, open mind. This obviously serves them well in any career/path…why can’t THAT be the reason?
So someone who majors in, and maybe even gets a graduate degree in, Social Work will have the same quality of living as someone who majored in Finance? Yes, someone who majored in Finance and went on to Investment Banking or Private Equity would be deticating more time and energy into work and travel, but can we really say that both students have the same quality of life?