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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“you control for everything that makes people choose their major in the first place”
So people pick their majors based solely on how smart they are and how much they want to work? I think this is probably not the case. I know that I picked a major (math) because the classes were interesting, after switching from physics and english. I think that what this research shows is something that a lot of other research has shown: an individual’s interests, intelligence, ambition and work ethic are more important than choice of major in determining how much money someone makes. In other words, if you are smart, hard working and ambitious, go ahead and major in history if you like it and don’t like business.
Also, this is research based on University of Texas graduates. A good school, and I am not slighting it in any way, but other smaller schools (which means every school except Ohio State) might not have exactly the same results. For a big example, try comparing UT grads and their majors to Bowdoin, Williams, Oberlin or Grinnell grads. Also good schools and you would likely see some pretty stark differences by major compared to Texas. I also know from some research by Ohio State on its own graduates I read a few years ago, that the differences in income between majors gets relatively smaller over time.
As a final point, advancement in business due to education is much more influenced by your MBA than your BA. The above mentioned Ohio State information showed that there was essentially no difference between OSU majors for students who went on to get MBA degrees. My dad (a retired economics professor) would always tell his students interested in business careers to major in a subject they liked. Take the econ classes you will need to get started in business and to get into an MBA program, but major in the subject you like so you get better grades and recommendations and so look better to business schools.
I skimmed through the paper, but didn’t see where you discuss the hours worked component. I have degrees in accounting and finance, my significant other has a undergrad degrees in psychology and special education, and 2 advanced degrees in psychology. In terms of annual compensation, I make considerably more than she. On an hourly basis, my guess is she probably makes substantially more, since she works at a school district 11 months a year from 9-4…
So, freakonomics research basically shows that at least half of the differences in salary among different college majors revolve around the numbers of hours worked, academic achievement, and social class.
So, basically, the lesson is that no matter what you do, there is always money to be made by talented individuals.
I think the lesson here is that an intelligent, hard-working and talented individual will succeed in life whether they major in a field that is thought to be money-making like engineering or one that is reputed to be financially useless like philosophy.
Engineers on average make more money because they are on average smarter and more committed than philosophy majors are on average, not because of something inherent in the choice of engineering as a major.
Having read only the abstract, it seems like the message is that the training you get from a major determines your income to a similar degree that trait factors like general intelligence and tolerance for hard work do. It’s not clear based on this cursory reading whether those trait factors are more important, only that they explain a lot of variance. This is not exactly a stunner, but it’s easy to call “obvious” in hindsight. (It looks like the main methods advance is to note, again interestingly but non-shockingly, that the people who make less money are also a bit less likely to respond, and that affects the differentials as well.)
To those of you who are pissed off at the idea that DH “discounted” the qualities you admire so much in yourselves: Chill out. He didn’t say those factors don’t matter; he tried to control for them statistically because they obviously DO matter, and since they’re correlated with choice of major, it affects how you attribute variance in income across majors.
So we’re talking about income brackets. First off, ask any member of the industry sector of engineers (the actual working ones, not the academics) if every member of their team is a hard working, “smart” (whatever the heck that means) person. I’m going to guess you’ll find the answer to that is a resounding no.
So then who are these unqualified people and why are they employed there? Just being a major of flavor X does not imply that you have the capacity to preform the job of X professionally. Raise your hand if you know some one in your graduating class that didn’t deserve the degree they got. Remember those people will get jobs too. Eventually.
Large quantities of people will claim that they are underpaid for their level of ability, and work output. Set aside for a moment the inherent basis, and look at the people whom actually are underpaid, and ask, why is this so?
In every work place there is also an implicit social network. Promotions and pay are not always directly correlated to how well you do your job.
The simple truth is that in a large number of cases your ability to preform your job, is only loosely correlated with your compensation. All the qualified women will attest to this, as the get lower salaries than their less qualified male counterparts. Why? The mantra is: compensation is not solely based on ones performance.
While this is not a rule, it’s definitely not an exception.
The moral of the story, learn to network before you learn to build circuits. It’ll pay more (but you still need to know how to make a circuit).
To answer K, A (insert hard science major here) comes with some assumption about a marketable skill set. You would expect a CS major to be able to code some software and would hire her as such. What is the analogue for a history major? It’s not exactly clear what the marketable skills are, they’re not as well defined. Not to say that history isn’t important or hard. But comparing History to CS isn’t really a fair comparison, as the two are not really equivalent subjects. The minimum skills required to call your self a computer scientists are well defined, where as the minimum skills required to call your self a historian are not so well defined.
That being said, this is an “economics” blog, right? Whats is the yearly need for computer scientists flavor of services, vs. historians. Those numbers will directly impact your job search.
Long story short, demand for CS (pre-bubble times) was so high, we had to churn them out as fast as we could, with the inherent quantity vs quality trade off. Now that a good bulk of the software has been written, we’ll need people that can write “good” software. As the market dries up, you’ll see it become less “easy” to find a job as a CS major.
This makes perfect sense to me. Salary is driven more by the work ethic and intelligence of the person. Their degree is as much an effect as a cause.
I imagine the degree effect also varies significantly by industry. In many of the higher earning potential industries, say Finance, the degree is merely the foot in the door and the rest is up to the individual and thus the degree effect is likely muted. In other industries, such as education or architecture, salary are directly tied to the degree(s) held. This dynamic, the lower the industry salary, the bigger the influence of the degree, could serve to mute the overall relationship.
I have a degree in Philosophy. I learned quite a few things during my journey from there to my position in a Fortune 10 company.
First, I loved philosophy. But looking back, I see that it gained me no favors. I had to often start at entry level positions. BUT…because of the thinking, argumentation, logic, and writing skills (do not judge from my online writing!) I had developed in all of those courses, I had skills that propelled me.
If I were doing it again, I would MINOR in Philosophy and major in something more practical in paycheck world (e.g., business, engineering, law, etc.).
Second, I learned that Ivy League and Minor League are but an eyelash apart. That is, the average philosophy professor at Podunk University is not completely outshone by the average philosophy professor at Harvard. Yes, the names are brighter, the fame greater. But the content pretty much the same. That is, if you suddenly switched the professors in a double-blind study, the Podunk U. students would come out much differently. Conversely, the Harvard students wouldn’t come out much differently.
This brings me to the third point: It’s the STUDENT that really matters. A great student in an average university will get a great education. A poor student at Harvard will get a poor education. Of course, with “Harvard” on the resume, the poor student gets the attention and the bucks (at least for now). That is, the quality of the education is largely a perception by employers, and not a measurable one (unless we have some sort of subject matter test and see for ourselves).
Lastly, if you are working 70 hours a week to make 100,000 per year, and I am working 40 hours a week to make 50,000 year, I would consider myself the winner. Yes, you may make a bit more money per hour than I do, but what about opportunity costs–the time you DIDN’T spend with your child? the fatigue? the time not spent reading a great book?
In one master-level business class, having to work, I did exactly one homework assignment. I still made a B. I figured, “If I made a B and barely exerted myself….” Yeah, kind of lazy (I had a job, too), but sometimes you must do just that sort of analysis.
If it was all about money, the other guys win, hands-down. But it’s not all about money. And it never has been. It’s about having a life. And that is one thing I have plenty of!