THE TEACHING ECONOMIST - William A. McEachern
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William A. McEachern, Editor
IS COLLEGE WORTH IT?
A weak job market in the wake of the Great Recession and rising student-loan debt are making more people wonder whether college is worth it. For example, earlier this year, Country Financial polled 3,000 American households and found that 50% said college is worth it. That's down steadily each year from 2008 when 81% said so.
Has college turned into an iffy investment? In a literature review published this past spring, Philip Oreopoulos and Uros Petronijevic concluded that the returns from a college degree climbed substantially during the past three decades. And while returns differ across college programs and occupations, college graduates enjoy an earnings premium across all major occupations. What's more, those at the margin of attending (whether because of financial constraints or otherwise) benefit from graduating at least as much as those from the more general college population (of course, the key here is to graduate).
The authors argue that skill-biased technological change has increased the demand for workers with abstract and cognitive reasoning skills. See "Making College Worth It: A Review of Research on the Returns of Higher Education," NBER Working Paper No. 19053 (May 2013).
No question, some fields of study yield higher returns than others. On that point, in another study published this past spring, Anthony P. Carnevale and Ban Cheah looked at median earnings and unemployment rates across dozens of college majors. Data from the U.S. Census Bureau's American Community Survey for 2010 and 2011 were pooled to create a larger sample. Reported pay by major was based on median annual earnings in 2010 dollars rounded to the nearest $1,000.
My focus here will be on results for "experienced workers," because that group offered the largest, most reliable sample. Experienced workers here are defined as those age 30 to 54 with a bachelor's as their highest degree. Overall, experienced workers on average earn more than double that of workers in the same age group who graduated from high school and triple that of such workers who failed to finish high school. Among 93 college majors for which sufficient data are available, the highest median earnings were for pharmacy majors at $108k. The next two were chemical engineering at $94k and electrical engineering at $91k. The lowest paid major was early childhood education at $39k. Those majoring in human services/community organizing ranked second from the bottom at $40k. And, in a three-way tie for third from the bottom, with median earnings of $41k, were majors in elementary education, religion, and social work.
Of potential interest to readers of The Teaching Economist is the study's distinction between those who majored in economics from the social-science side of the curriculum, what the study simply calls "economics majors," and those who majored in economics from the business side of the curriculum, what the study calls "business economics majors." With a median pay of $75k, those majoring in "economics" tied for 13th place among the 93 majors. Economics majors were the top earners among the seven social science majors. The other six averaged $56.5k. Interdisciplinary social science majors were the lowest paid at $45k.
Majors in "business economics" also earned a median pay of $75k and were in that two-way tie with economics for 13th place. Business economics ranked second from the top among the 11 business majors, just below those from MIS/statistics, which had a median pay of $76k. Majors from the 10 other business fields averaged $62.8k. The lowest paid business majors were from hospitality management at $52k.
What about unemployment rates among experienced workers? Overall, their unemployment rate was less than half that of non-college graduates of the same age group. The lowest rate among the 93 majors was 2.1% for majors in medical therapies. Next lowest were nursing majors at 2.3%, and tied at 2.5% were production technologies and pharmacy. The highest unemployment rate was for humanities majors at 9.8%. Tied for second highest at 9.3% were architecture and the visual and performing arts.
Economics majors had an unemployment rate of 5.3%, which ranked about in the middle of the 93 majors, but was lowest among the seven social science majors. Among the six other social sciences, the average unemployment rate was 6.4%. The general social science major had the highest rate at 7.5%. Thus, among the seven social science majors, economics had the highest median pay and the lowest unemployment rate. Among all 93 majors, economics was tied for 13th in median earnings with business economics and had an unemployment rate in middle.
Business economics majors had an unemployment rate of 5.9%, ranking 32nd from the top among all 93 majors and next to highest among the 11 business majors. The 10 other business majors averaged 5.3%. MIS/statistics had the lowest rate at 4.0%, and international business had the highest at 7.9%. In terms of median pay, sorting out economics majors from business economics majors turns out to be a distinction without a difference. But economics majors had a slightly lower unemployment rate. More generally, the market rewards majors in scientific and technical fields more than majors in softer fields.
See Hard Times 2013: College Majors, Unemployment and Earnings, Georgetown University's Center on Education and the Work Force, (May 2013). This study may be downloaded for free at: http://www9.georgetown.edu/grad/gppi/hpi/cew/pdfs/HardTimes.2013.2.pdf.